A home loan modification allows you to adjust the terms of your mortgage when you are having trouble abiding by the original agreement. It is an alternative to letting your home go into foreclosure.
A modification offers you some benefits, but it also has some disadvantages that you should know before you start the process.
Changed terms
The different terms under the home loan modification may mean you pay more. You may have higher interest rates and a longer payback period. This means more money out of your pocket. However, you do still get a chance to keep your home and to stay current on your loan.
Credit impact
Because you are not abiding by the original terms of your loan and making changes that could add to your debt or extend the debt period, it can bring down your credit score. Still, you should weigh that against what would happen if you ended up in foreclosure, which would be far worse.
Predatory third-party companies
Some companies will offer you deals that seem amazing, but they are only preying on you because you are in a vulnerable state. They will give you bad terms and deals that will leave you worse off in the long run. You should only try to do a home loan modification through your lender or a mortgage service provider to avoid these scams.
The downsides of a home loan modification usually are not as bad as the alternative. For some people, this is the best option to enable them to stay in their homes and avoid serious financial issues.
