Mortgage Refinancing Vs. Mortgage Modification


April 5, 2016

If you are struggling to pay your mortgage, you might already be considering mortgage refinancing or mortgage modification. They are two different things. Mortgage refinancing replaces the existing loan with a new one but with different terms. Mortgage modification changes the existing loan terms. They may sound the same but the benefits and disadvantages are different for each.

You can consider mortgage refinancing if any of the following are true:

  • Better interest rates are available
  • You want to change the length of your loan
  • Changing from a variable-rate to a fixed-rate loan
  • You need cash from your home’s equity
  • Your credit score has improved

You can consider a mortgage modification if any of the following are true:

  • You want to reduce your existing loans interest rate
  • Your home is underwater
  • You want to reduce your monthly payment
  • You want extend the length of your term
  • You need to cap your mortgage payment to a percentage of your household income

Which is Better?

There are several things you should know when deciding whether to refinance or modify. In general, there two primary factors which dictate which option you are more likely to qualify for:

  1. Are you up to date on your payments or are you behind? If you are already behind, you may not qualify for a refinance and may need to apply for a modification.
  2. Is your home underwater or do you have equity? If you home is underwater, you may not qualify for a conventional refinance, but you could still qualify for a refinance under the HARP program.

With mortgage modification, there are certain criteria you need to have in order to qualify:

  • You must have financial hardship
  • Already behind several payments
  • You must still own the residence and it must be your primary home

The key benefits to mortgage modification is that your home can be in foreclosure, default or you may even be in bankruptcy when the application is submitted.

Once you’ve decided whether to refinance or modify, the process can be lengthy and not always easy. Because of the large number of available programs, it can be difficult to find one that’s right for you.

The choice you make is dependent upon your financial circumstances, and which would be better for you. Seeking advisement from legal counsel is a good place to start if you are unsure. The Law Office of Michael A. Ziegler, P.L. is a loan modification attorney serving Clearwater Florida. We may be able to help you keep your home and ensure the process goes smoothly. Call us at (727) 538-4188 or contact us online for a free case evaluation.

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