What is a Loan Modification?

What is a Loan Modification in Billings Montana

Often called a loan modification, mortgage modification, restructuring, or a workout

It’s when a borrower in Billings Montana who is facing financial hardship and is having difficulty making their mortgage payments works with their lender to change the terms of their mortgage loan.

A loan modification in Billings Montana may also be an option for individuals who find that the amount they owe on their home is more than the actual value because of declining property values.

Loan modifications are designed to be a long–‐term solution that enables borrowers to repay their loan and maintain ownership of their home. A loan modification is an ideal solution for those who wish to keep their homes.

How many people do you know in Billings Montana that could benefit from staying in their home?

We have a relationship with most lenders, and they would rather work with us than force the clients into foreclosure. The average cost of a foreclosure is $80,000. Banks lose big time!

This is why loan mods in Billings Montana are so hot right now.

There are three different types of loan mods. Let me break them down for you.

Sometimes more than one type applies to the same loan.

Interest Rate Modifications

You probably know what these are, but just in case.

One of the most common loan modification requests is for a lower interest rate.

Lowering the interest rate offers the following benefits to the homeowner:

  • Increased ability to pay monthly mortgage payments
  • Ability to save money


Pre-Loan Mod

Loan Amount 300,000

Interest Rate 7 percent

Payment $1,9995.91

After Loan Mod

Loan 300,000

Interest Rate 2 percent

Payment 1,108.86

Not bad.  Examples get really amazing when you look at subprime borrowers in states like California.  But you can still see some incredible results right here in Billings too.  Some homeowners have seen their mortgage payment drop over $2,500 per month!

How many people could you help if they knew they would save this much money?

When ARM loans first started to adjust a couple years ago, banks were completely rigid in their fight to collect the payments. Millions of foreclosures later, they have adjusted their stringent ways. They will gladly lower interest rates if they can avoid a foreclosure.

Some lenders will also lengthen the amortization term, which I’ll tell you about next.

Lengthening Amortizations

The length of amortization refers to how many years the borrower has financed the loan. Most loans have 30–‐year terms. A common loan modification request is to ask the bank for a longer period of time to repay the loan. Banks are fairly amenable to doing this especially in today’s economy.  Some refuse to lengthen the amortization, but most will offer some sort of compromise.

While lengthening the terms of the loan contract may not dramatically lower monthly mortgage payments, it is a strategy that is often utilized to replace interest–‐only payments. By lengthening the amortization period, a portion of each monthly payment the homeowner makes will be put toward the principal balance of the loan, rather than just the interest.

The options are 30–‐, 40–‐, and very rarely 50–‐year terms. Most often the lender will lengthen the term and lower the interest rate.

Here is an example

Pre-Loan Mod

Loan Mod 350,000

Interest Rate 7 percent

Term 30 Years

Payment $2,328.56

After Loan Mod

Interest Rate 2

Term 40 years

Payment 1059.89

Saving $1268.67 per month or $76,129.20 in five years

Principal Balance Reductions

This has become very popular with Obama’s new plan.  Recently, homeowners who are not late or facing foreclosure can qualify for this.

Principal reduction is basically asking the lender to forgive a portion of the loan. Lenders

Don’t like this one very much, because they are wiping the slate clean but they still may be willing to do it to prevent future problems.

This option makes sense when the property value is worth much less than the loan balance. If the homeowner owes $400,000 on a property that is worth $290,000, why would they continue to make payments? They are more likely to abandon the property.

It really doesn’t matter if it destroys the person’s credit; it is still smarter to get the hell out of there.

Any question or concerns call me today by going to www.sellmthomes.com my number is on the web site and I will answer any questions you have or call to set up a free consultation to see if I can help save your home.

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