Is a Loan Modification the Right Option for You?

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By Louis Zambrano | Jan. 24, 2019, at 3:56 p.m.

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We know that going through a mortgage hardship is one of the most stressful situations a homeowner can go through. Receiving hundreds of calls a day, being placed on a lis pendens list, and multiple calls from your lender asking if you’d like to apply for a loan modification. But is a loan modification the best alternative for you in your current position? With a loan modification you will lower your monthly premiums and stop the phone calls demanding that you catch up on your payments. It sounds like an amazing program, but this is when we, here at SIMS ask our clients to look at their situation logically, not emotionally.

Let’s say you do take the loan modification route, you may end up in a much worse financial situation both short and long term. When you are being threatened with foreclosure, people become stressed out and they have the right to be. Homeowners will try almost anything to keep their home, but it’s always best to be smart and informed. If you are offered a bad deal by your lender, just say "no" and keep calm because there are other options available to you. If you are a homeowner ‘underwater’ it just doesn’t make financial sense to agree to a loan modification and owe more than what the home is worth. 

Why Loan Modification isn’t a Good Alternative

A great example that we use to explain to our clients why a loan modification is not always a good alternative to combat a foreclosure for most homeowners is let’s say that the current market value of your property is $600,000, but you owe $800,000 on your mortgage, including late fees and interest. Even if your lender gives you a lower monthly payment, in the end you will be paying $800,000 for a property that is only worth $600,000. Take a second to think about that. You may be better off getting your entire outstanding mortgage forgiven by selling your home in a short sale to get a fresh start. And for those homeowners who do sell through a short sale can purchase a home 2 years later and be able to establish a much better financial position. But not all situations are the same, and that’s why here at SIMS Management Group we sit down one-on-one with each of our clients to find out their specific circumstances before we give them any advice. This is why we always ask our clients to look at their situation logically, not emotionally because they might not always make the right decision under stress. 

​Here at SIMS we feel like it is our job to educate our clients and explain their options so they can understand if a loan modification is really in their best interest. We wouldn’t like any of our clients paying for a home that is a liability. This is why there are options open to them where they can sell and walk away from their property debt free, with a fresh start. 

If you are looking to speak to a professional, there are many skilled real estate agencies like 'sims management' that are available to help ease the pressure and the nightmare of foreclosure by giving you experienced advice on foreclosure to help the process move smoother and finding a buyer for the property.

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