There are several ways that lenders may lower monthly payments of home loans through mortgage modification. One such way is to increase the length of the loan. Dividing the remainder of a loan over as many months as possible can drastically lower a person’s monthly payment. While most lenders don’t offer loans in excess of 30 years to run of the mill borrowers, a loan modification can extend a loan to any amount of time that is agreed to by both parties. For example, if a lender approves a loan modification that gives the borrower 40 years to pay, the borrower will be the holder of a 40 year loan. Don’t get too excited, this type of loan modification is rare, but nothing says that it is entirely out of the realm of possibility. The policies of each lender will vary, and some won’t even entertain the idea of modifying the length of a loan to over 30 years. Others might entertain the idea in cases of extreme hardship.
Home loan modifications work by modifying the terms of an original mortgage contract. When both parties of the contract agree to modify a loan term, the term is changed, and the borrower begins making payments that reflect the changes to the loan almost immediately.
If a loan is going to be extended by any amount via a home loan modification, the length of the extension will depend on the amount of money a person is able to pay towards their loan. For example, if a person requests a home loan modification to lower their monthly mortgage payment from $1,000 to $650, the lender will determine how long it will take to pay off the loan at the requested monthly payment amount and will adjust the length of the loan accordingly. In this example, if the lender can accommodate the borrower by giving them an extra decade or two to pay off the loan, they will do so if they are serious about helping the borrower and if they are willing to accept the risk of the increased loan length.
It is important for borrowers to consider the pros and cons of adding time to their original loan. If the amount of time on a loan is the only loan item to be modified, one must consider the amount of interest that will be paid over the years. This choice is really a personal matter because some borrowers would rather pay more now to lower their overall expenses while others would rather pay less now and increase their overall expenses. Contact a local real estate or finance attorney for guidance specific to one’s personal financial situation and future financial plans.
Many borrowers think that adding time to their loan is a step backwards. Many would rather struggle with monthly payments than be forced to start all over with a new 30 year term. While this argument is understandable, one must consider the consequences of avoiding home loan modifications on these grounds. Wouldn’t losing a home to foreclosure be a greater step back than just having to make payments longer than expected?