Yes, it is possible to get a loan modification on your mortgage – even if you are behind on your payments.
A loan modification is a change to the terms of your existing mortgage loan to make it more affordable and manageable for you, particularly if you are facing financial hardship or have difficulty making your monthly payments. The whole goal of this process is to avoid foreclosure.
How can a mortgage modification work?
The first step is to reach out to your mortgage lender as soon as you realize you may have trouble making payments. They can provide information on their specific loan modification programs and requirements, but here are some possibilities:
- An interest rate reduction: Sometimes lenders will do this if the interest rate on the existing loan is higher than the going rate today. If you bought when interest rates were particularly low, however, this probably won’t be a viable option.
- Converting your loan to a fixed-rate mortgage: If you have an adjustable-rate mortgage or are expecting a balloon payment, you may be able to modify your loan to a fixed-rate mortgage that will give you payment stability.
- Extending your repayment period: Sometimes adding years to your loan is the best way to go. If your loan is extended another 10 or 20 years, for example, that stretches out your payments (although it will also increase the cost of the interest over time).
- Rolling your overdue payments into the loan: If you have already recovered your financial stability but are simply too far behind to catch up, your lender may agree to “roll over” the overdue payments and tack them onto the end of your loan. That may only extend your repayment period by a matter of months.
It’s essential to act quickly if you’re behind on your mortgage payments, as lenders may be more willing to work with you if you reach out early in the foreclosure process. Legal assistance can help you navigate the loan modification options, as they can be complex and may vary depending on your lender and your specific circumstances.