Most homeowners exploring mortgage modifications have run across the more popular methods such as reducing and fixing the interest rate or extending the term of the mortgage loan. For those of you living under a rock, reducing and fixing the interest rate is exactly that. The interest rate charged on the principal balance of the loan is converted from an adjustable rate mortgage (also known as an “ARM”) to a fixed rate of interest, often at a rate much lower than currently being charged on the loan. Additionally, modifying a mortgage loan through extending the term is equally self-explanatory. In that situation, the term of the mortgage loan is stretch out, giving the borrower additional years to pay off the promissory note secured by the mortgage. That necessarily means that it takes longer to pay off the loan. The extra time is sometimes the difference that is needed to prevent foreclosure.
However, many homeowners dealing with foreclosure mistakenly believe that the aforementioned methods are the only options. Fortunately, there are many other foreclosure alternatives that a homeowner can consider.
First, the homeowner can request short refinancing from their lender. In a nutshell, this option is where the lender or other financial institution modifies the current mortgage loan so that the borrower gets a new loan with a lower interest rate, usually on a fixed term (as opposed to an ARM).
Second, the homeowner can request assistance from the government through one of their many foreclosure assistant programs. One of the most popular governmental programs is the HomeSaver Advance (also known as “HSA”) which helps the homeowner clear late or delinquent mortgage payments.
Finally, the homeowner can sell their home. While this may seem like common sense, it is amazing how many times a borrower thinks their only option is to pay the mortgage or move out. When they do that, however, they often times literally leave money on the table in the form of the their equity.