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Refinance or Loan Modification
Foreclosure is definitely one of the hardest things anyone has to face. Imagine losing your home, a place your children grew up in, and the place you thought youd have for years to come. The economic situation in the entire country has left families and individuals homeless and others are on the verge of losing it all.
For the families and homeowners who still have time to save their homes, there are two solutions that might just save your home Refinancing and Loan Modification.
The complexity of the foreclosure problem means that there are differences in each loan or mortgage. The circumstances of the delinquent borrower are also factors in deciding which solution is best for you. However not all applicants will get approval for refinancing or loan modification.
Which would be best? There is no exact answer to this question because every mortgage is different so what may be better for your neighbor might not work for you. However, each of these solutions has its own advantages and disadvantages.
Refinancing:
In a refinancing strategy, your old loan is replaced with a new one where terms are changed to one you can handle and pay. For example interest rates can be lowered or payment terms extended from 15 years to 30 years. This is seen by many as a more permanent solution compared to modifications.
While there are various advantages to refinancing mortgages, there are also challenges in the strategy. You have to pay for closing fees to your new lender that can be quite a huge amount for a family already facing foreclosure. Its also difficult to get approval because of a lot of requirements you have to meet. Declining market value for your property, for instance is a major no-no. A property appraisal is required in your application. Underwater mortgages are almost immediately denied. Loss of income is an automatic red flag for your potential lenders as well.
Loan Modification:
Loan modification is more forgiving in that it takes the delinquent lenders hardship into consideration. In some cases, the lender can lower the principal it self to reflect the decreased market value of the property. In negotiating new affordable monthly payments, lenders will consider your living expenses so you can pay your mortgage but still have money to pay your utilities. Loan modification also helps you keep your credit score where it is.
Another advantage is that while processing your loan modification, the foreclosure process is halted and you get another chance to keep your home. In the new government loan mod program, desperate borrowers are counseled by financial experts so they can avoid getting into foreclosures in the future.
There are only a few disadvantages to loan modification. Many of the lenders do not offer the government loan mod program (HAMP) but they have their own in-house strategies. Borrowers can only apply to the program if they can prove their hardship like a loss of family, loss of income, etc. Lastly, the borrower cannot increase the loan and take out equity.
Know Loan, Loan More
Every time we hear the word loan, what is that first thing that comes in to your mind? What is does loan really mean?
Like all the other kinds of debts, a loan involves the redistribution of financial assets over time, among the two parties who are the lender ad the borrower. Usually it is the borrower that accepts or borrows an amount of money which is technically called the principal, from the lender and is the one responsible to pay back the same amount of money lend to the lender at an agreed time. The borrowed money is usually paid in return through regular installments, or partial installments; annually, each is installment has the same amount. The interest which is the cost provided to a loan offers an inducement for the lender to indulge in the loan. Each obligation and limitations in legal terms is compulsory by agreement- either written or verbal form- which can put also the borrower under the additional limitation such as loan treaty.
Below are the types of loans with the corresponding meaning:
Secured loan. A type of loan wherein the borrower promises some asset like a car or a house as a guarantee for the loan
Mortgage loan. This is a type of loan which is very common one that is used by most people in buying housing. The money is use to achieve the property in this kind of contract. However, the institution is rendered a security until the mortgage is paid fully. While if the borrower had fail to paid the loan, the right to possess again the house and sell it is in the hand of a bank just to cover the sums owing it.
Recourse note is another kind of loan that is especially use in limited partnership agreements. It is secured of course by a pledge of collateral, typically real property therefore considered as secured loan but for which the borrower is not personally responsible.
Unsecured loans. Unsecured loans are budgetary loans that are not secured over the asset of the borrower. These are may available loans from financial buildings under various marketing packages like credit card debt, personal loans, bank overdrafts, credit facilities and corporate bonds. In these forms, the applicable interest rate depends on the lender and the borrower. However, these may or may not be arrange by the law.
Therefore make sure you:
1.Always take a walk round the shop and look for the best loan fit in your situation. 2.Ensure that you have read all necessary paperwork and details about your loans. 3.Make sure that you can manage easily the monthly payment or you may find yourself sinking in financial trouble.