Where to begin? First off, a refinance involves the payoff of an existing loan with a new loan. A loan modification is not a new loan, but rather a mortgage bailout that constitutes a change to the terms of an existing loan. Loan modification is a compelling alternative when a homeowner is denied the ability to refinance and they are struggling to maintain their house payment or trying to stop foreclosure.
Refinancing requires that a lender verify your credit history to determine if you are credit worthy. Loan modifications do not require a credit check. Your lender will attempt to determine your ability to repay the loan at the new, modified terms, based on information you provide them. Whereas a delinquent payment history will typically result in the denial of a refinance request, delinquent payments typically will help you qualify for a loan modification.
An appraisal is almost always required when refinancing a mortgage. This is to ensure that the new loan is sufficiently secured by the collateral, your home. A loan modification request is not dependent on the value of your home. In fact, most modification candidates owe more than their homes are worth! This is the primary reason they are unable to refinance.
Homeowners often refinance their homes to access additional equity which they might use to consolidate debt, fund other purchases or pursue investment opportunities. Loan modifications do not allow homeowners to take additional “cash out”. However, you can most likely roll delinquent payments and, if applicable, legal fees into a loan modification.
Lastly, loan modification often costs less than a new mortgage refinance. Although Loan modification is more limited in some respects than refinancing, it’s importance as an effective tool to assist homeowners cannot be understated. The professional loan modification services that Michigan Mortgage Modification provides are a cost effective alternative for struggling homeowners unable to refinance for any reason. To learn more about loan modifications, visit www.MichiganMortgageModification.com.