What is the difference between a loan modification and a refinance?

Loan Modification

A loan modification is a modification of an existing mortgage loan.  The loan is modified with the purpose of allowing you, the homeowner, to remain in your home without a past due balance, allowing the foreclosure case to be dismissed.  The loan can be modified in several ways, and each individual loan is unique.  The ultimate goal of a loan modification is to reduce your monthly payment to enable you to keep your home with a monthly payment you can afford. 

When loans are modified, the length of the loan can be extended, the interest rate can be reduced, the overall amount owed can be reduced, or a combination of any or all of these.  Keep in mind, it is very rare for the amount owed, also known as the total principal, to be reduced.   Also, loans can be modified by taking the past due balance and adding it to the end of the loan as a balloon payment with zero interest.  A balloon payment comes due at the end of the loan in a lump sum, or can come due if the home is sold or refinanced.  As you can see, there are many terms that should be negotiated when pursuing a loan modification.  For loan modifications, there are no closing costs, and you can usually obtain a better interest rate than your current rate and lower than the market rate.  In addition, modifying your loan brings it current, which means there is nothing past due.  This allows you to get your foreclosure case dismissed and save future legal fees.

Refinance

You may be able to refinance your home. This means you may be able to borrow money from another lender to allow you to pay off your existing mortgage and end the foreclosure case. You can go to any credible bank or lending institution to see if you qualify to refinance your loan. Most of the time, homeowners do not qualify because of their credit score. If you have been denied by other lenders for refinancing your existing mortgage, Kyle & Kyle Law may be able to help. As you approach this option, there are things you need to consider. For example, you want to be aware of any closing costs and other fees the lender will add to your mortgage, or you will be required to pay at closing, if you were to refinance. Some companies offer reduced fees or subsidize the costs for you to refinance. You will want to consider this when you are considering a refinancing your loan.

If you are trying to determine what option makes the most sense for you, call Kyle & Kyle Law to schedule a free consultation at 877-595-3529.  We are here 24/7 to answer your call and can schedule a consultation for you to speak to an attorney.