Behind on your mortgage? Modify or Sell!

January 1, 2009

Plenty of borrowers think it wise to avoid calls from their lender when they start to fall behind on their monthly mortgage payments. Nothing could be further from the truth and this decision could very well be laying the foundation for an eventual foreclosure. It makes much more sense to have those conversations, explain your position, and then see what sort of resolution your bank offers.

Many home owners that are in trouble with their mortgages don’t even realize how common their situation is today. If they only knew how many other people are in the same boat they might not feel so embarrassed and might actually have a chance of solving the problem.

Be proactive. Call your lender.

Give your bank a call or visit their Internet home page. You might be surprised how many lenders have solutions right on the home page. This should tell you that financial troubles are obviously quite common in 2008 and 2009. Why else would lenders place links right on the home page offering loan modifications and short sale assistance?

What is a loan modification?

A loan modification is simply where your bank adjusts the terms of your loan to make it more affordable to you, the borrower. Most loan modifications involve a simple adjustment of the interest rate on your existing loan from a higher rate to a lower rate, but the loan modification doesn’t address an even bigger concern. If you owe $180,000 and your home is now only worth $90,000 a loan modification isn’t going to help with this $90,000 difference. Sure, it will lower your monthly payments, but the $90,000 difference will stay with you for years and years while the market continues to decline, eventually stabilizes, and then finally climbs slowly back to the $180,000 price level. A short sale might make more sense.

If dealing with your bank scares the heck out of you contact a qualified Realtor to handle the short sale process. And a short sale might be your best option. A short sale is where you sell your home for less than you owe the bank – with your banks approval, naturally. It is a tricky, complicated and stressful experience for most borrowers so hiring a Realtor makes sense.

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