If you are one of the many homeowners in New Jersey who are falling behind on their mortgage payments and facing foreclosure, you are likely looking for a way to keep your house. While Chapter 13 bankruptcy may be the answer for some, it may not be your only option.
In fact, mortgage loan modifications are often an effective way to avoid foreclosure.
First, Forbes explains that you must check with your lender to make sure that a loan modification is an option, as not every mortgage company offers this option. Those that do typically require proof that the homeowner is undergoing a hardship. For example, you may have financial hardship due to:
- Lost income
- Natural disaster or national emergency
- Illness or disability
- Divorce or separation
Because each lender’s qualifications differ, you will have to do some research to discover exactly what you will need to apply.
Types of relief
A loan modification is not the same as refinancing. It may take the form of a reduced interest rate or a change from an adjustable-rate mortgage to a fixed-rate mortgage. Either of these could result in a more affordable monthly payment.
Your lender may agree to stretch out the length of your loan, so that instead of a 15-year note, you have a 20-year note. Another option may be to roll all your late fees into the loan principal to spread out your current debt into the new balance. While this could result in a higher payment, if the lender combines it with a longer loan period, it could still result in lower monthly payments.
In rare cases, a lender may forgive some of the debt or take other actions to lower the amount that you owe.