A loan modification can change your mortgage terms in several ways, making your loan more manageable. If you’re struggling with payments, adjusting your loan terms might be an option. Understanding how these changes impact your mortgage can help you make informed decisions.
Lower monthly payments
One of the main benefits of a loan modification is a lower monthly payment. Lenders achieve this by extending the loan term, lowering the interest rate, or both. In Maryland, programs like the Maryland Homeowner Assistance Fund offer support for those seeking modifications. Lower payments can make homeownership more sustainable.
Adjusted interest rates
A loan modification may result in a lower interest rate, reducing the total amount you pay over time. In some cases, lenders offer fixed-rate loans to replace adjustable-rate mortgages, providing stability. Maryland law requires lenders to act in good faith when negotiating modifications, ensuring fair terms for homeowners.
Loan term extensions
Extending the loan term can make payments more affordable by spreading them over a longer period. For example, you could extend a 30-year mortgage to 40 years, reducing monthly costs. However, this may increase the total interest paid over the life of the loan. Maryland law regulates how lenders handle these extensions to prevent unfair lending practices.
Deferred or forgiven principal
Some modifications allow a portion of the principal to be deferred or forgiven. Deferred principal means it’s added to the end of the loan, while forgiven principal reduces the total amount owed. Maryland foreclosure prevention programs sometimes encourage lenders to offer these options to help homeowners stay in their homes.
Ending delinquency status
A successful loan modification can bring a delinquent mortgage current, stopping foreclosure proceedings. Maryland law provides homeowners with the right to request modifications before foreclosure, giving them a chance to stay in their homes.