Can I Change the Length of the Loan on a Modification Loan?

If you are having trouble making your mortgage payments, you may want to apply for a loan modification. Mortgage servicers use modifications to make your payment affordable. The length of your loan can be changed under certain conditions.

Qualifications

To qualify for a loan modification, you must be paying more than 31 percent of your monthly gross income in mortgage payments.

Lower Interest Rates

Lenders may lower your interest rate to bring your monthly payment below the 31 percent level. The interest rate can be reduced to as low as 2 percent.

Longer Terms

If the interest rate reduction is not sufficient, the lender may agree to extend your loan term to 40 years. A longer term will reduce your monthly payment.

Deferring Part of the Balance

If the new term of a loan does not sufficiently lower the mortgage payment, your lender may defer some of the mortgage balance. This means that a portion of the balance will be pushed to the end of the loan. You would pay back the deferred portion at the end of the loan term.

Partial Loan Forgiveness

Lenders also have the option of forgiving a portion of the loan to help make payments affordable.

References

• MakingHomeAffordable.gov: Help for America's Homeowners
• MakingHomeAffordable.gov: Frequently Asked Questions