There are many individuals who view foreclosure as a wiser option compared to loan modification. But the thing is, it is entirely false. Loan modification has a process which can be quite elaborate compared to the process of foreclosure. Because of this, people end up opting for foreclosure in its place.
Banks are always keen on getting the full amount of their loans rather than simply being stuck with some property that has been foreclosed. This would eventually turn out to be a bad debt anyway, until such time that they could auction it off. The reason why loan modification exists is so people – namely, the home loan borrowers who are also financially distressed – can have a way to manage such financial hardships that come with being unable to pay their mortgages. Loan modifications usually involve the following, even just parts of it: having the interest rate reset, deferring payment for a determined amount of time and having the principle amount readjusted.
When you go with the home loan modification option, you get to keep your home and you also preserve your dignity as you demonstrate the willingness to battle the odds to keep the right to your home. With a new home loan modification program which is supported by the federal government, borrowers who can manage the modified loan mortgages for an average of three whole months can be eligible for a thousand dollar loan reduction on their principle amount. The federal programs stands for five years, which means if you are a borrower you can save up to five thousand dollars of the duration of the program if you choose to avail of it.Of course, you can also keep from taking action in order to prevent any consequences attached with the foreclosure – a regrettable thing you will definitely want to avoid.
This experience could also be an emotionally difficult time for you and your family, too – not just monetarily. Even if you let go of the home (which is already a painful thing to do), you are still going to face the mortgage responsibility. If your debt is not answered with the property auction, the difference will still be paid off by the borrower and the balance added to one's credit history until such time it has been paid in full. Furthermore, it comes with a stigma that any borrower will most likely bring with him for a very long time.
Truly, there are many costs attached to such a thing as a foreclosure – costs that could affect you in many ways. These are even way higher and costlier compared to loan modifications. These costs are, to sum up, a combination of the emotional, the physical and (of course) the financial stigmas that you will carry for quite a long period of time.
Loan modification has better things to offer when buying a home. If you are aiming for long term options, this becomes all the more significant. If you have a property at the moment, you can even apply for loan modification for it, too. You are still the owner, all the while making the necessary changes to its terms and conditions.
