Financial problems like losing your job, getting sick, or going through a divorce can make it hard to pay your mortgage. If you’re struggling to make your monthly mortgage payments, a loan modification might help.
What Is a Mortgage Loan Modification?
A loan modification means your lender changes the terms of your current mortgage—like lowering the monthly payment or extending the time you have to pay it back—so your payments are more manageable.
Mortgage loan modification is different from refinancing, where you replace your mortgage with a new one. Sometimes, the lender will first give you a trial period with new payments before making the changes permanent.
Types of Mortgage Modifications
Depending on your situation, your lender might offer options like:
- Lowering your interest rate or the amount you owe each month.
- Extending your repayment period, sometimes up to 40 years, which can lower your monthly payment.
- Adding missed payments to your loan balance so you can catch up.
- Forgiving part of what you owe to reduce your payment.
- Changing your loan from an adjustable or interest-only rate to a fixed-rate mortgage.
Who Qualifies for a Loan Modification?
Requirements vary, but usually, you need to:
- Prove that you’re having financial trouble (such as lost income, unexpected expenses, or major life changes).
- Show that you can afford the new, lower payments.
The lender will check your income, savings, debts, and credit—similar to applying for a new mortgage.
How to Apply for a Mortgage Modification
If you’re behind on payments or know you can’t make your next one, call your lender right away. They can explain your options, including loan modification. You can also get free help from a HUD-approved housing counselor.
For your application, you’ll need to provide documents such as:
- Proof of your financial hardship (for example, a death certificate, or paperwork about a natural disaster).
- Financial documents showing reduced income or increased expenses.
- Recent bank statements.
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