A loan modification is a change of the original payment agreement between a borrower and a lender. This happens usually when the borrower is having trouble making the agreed upon monthly payments on time. Banks make money when borrowers pay them back the borrowed money, plus interest. When a loan goes into default, they not only lose the money they loaned out but they lose on all that interest they would have gotten. Bankruptcy or foreclosure means the bank only receives a portion of the money they loaned out and no interest. Loan modification is the bank’s way of working with a borrower so that you can afford to pay them back and they can make a good profit. It’s pretty clear how banks benefit from this situation, but it is good for you as the borrower, too. How?
- You can pay less each month. One type of Florida loan modification can lengthen the time you are allowed to pay the loan off. You will still pay the loan off in full, just over a longer period. However, you will end up paying more in interest in the end. If your financial situation has changed and you can no longer afford the same payments, this can keep you from defaulting on your loan.
- You might be able to stop home foreclosure! Foreclosures in Miami are a common occurrence. If you are able to modify your mortgage payments down to an affordable rate, you may be able to keep your home. If you are facing foreclosure, Miami foreclosure attorneys to help you determine if modifying your mortgage can help. The best time to try and avoid foreclosure is before the process starts, if you wait too long it might be too late. Florida loan modifications may let you keep your home.
- You can protect your credit score. Unless the modification forgives part of your principle balance, it will not affect your credit score. If you make late payments, file for bankruptcy or if you home is foreclosed on, your credit score will plummet. This means you will pay higher interest rates and may not be able to borrow money at all. Bad credit will follow you for years.
- It can save you money. Another common way to modify a loan is by lowering the interest rate. This means you will not only pay less money per month, but you will also pay less money over the life of the loan.
- Get out from under late fees that keep accruing. If you missed one or two monthly payments but are now able to make on time payments you might still be drowning under late fees that do not stop. By adding the months you missed to the end of the loan term, you can get back on time and stop the late fees. The lender may even forgive the late fees that are already in place.