Typically, those who modify their mortgages are already in default, meaning they have stopped paying their mortgage bills because they cannot afford the cost.
By negotiating with lenders, homeowners may be able to reduce their interest rates, reduce the principal amounts they owe on their homes, reduce late fees, reduce monthly payments or defer all payments to a later date.
Mortgage modification candidates
Despite such positive potential outcomes, mortgage modification isn’t right for everyone. The main characteristic necessary in modification candidates is financial hardship; in other words, candidates are typically several months late on mortgage payments.
Candidates also must show that, while they have hit financial hardship in the recent past, they once again have steady incomes and will be able to keep up with a modified loan going forward.
Some people simply do not fit the mold for mortgage modification, especially with the uncertainty currently surrounding Canada’s housing market. If you believe you’re not a candidate for mortgage modification or if you believe it’s not the right option for you, look into alternative solutions that can keep you away from foreclosure.
Alternatives to mortgage modification
Common alternatives to mortgage modification include mortgage refinancing and downsizing your home.
Mortgage refinancing is similar to mortgage modification in that it adjusts the repayment terms of your home loan. It can reduce your interest rate, lengthen your repayment time or increase your loan amount to cover other expenses. However, unlike with mortgage modification, just about any homeowner is eligible for refinancing, regardless of the loan’s standing.
This is a particularly good option if you’re struggling to make mortgage payments because you have other debt obligations. It can be used to consolidate debts like credit card debt, which would significantly cut down the amount of money you put toward interest.
Consolidating your loans in this way has other advantages, as well. It will decrease the number of obligations you have, automatically simplifying your monthly bill payments. It may also reduce your fees, saving you additional money.
You could also find ways of supplementing your income to make ends meet. If you have extra time, consider starting a part-time job to bring in a few extra dollars each month. Or, if you have extra space, consider leasing out a bedroom in your home. This could similarly bridge the gap between how much you are able to pay and how much you are required to pay.
If you can’t afford any amount of your mortgage, regardless of additional income, consider selling your home. Then you can use the equity you’ve already built up in your home to pay for a new, smaller one. In this way, you’d clear your debt without being forced out of your house. This is a significantly better option than foreclosure because you can leave on your own terms and receive a fair price for your property.
If you plan on buying or selling a home, visit ComFree.com today.