Real Estate

Home Loan Modifications Help Get Out of the Upside Down Trap

According to the latest statistics, 30-million American homeowners are currently upside down in their homes.

Now even if you do not know what being “upside down” means, you might have already figured out that it is a scary statistic which has analysts worried about the effect on the already troubled economy of the country.

For those of you who are not familiar with the term “upside down” in the mortgage industry, it basically refers to a situation where the total mortgage loan that a homeowner owes to the lender is higher than the worth of their home.

Home Loan Modifications

So imagine you bought a house in the year 2006 and negotiated with the bank for a particular interest rate and monthly payment. But over the next year or so due to the economy tumbling, the value of your home keeps going down and you end up losing as much as $100, 000 or more on the house value. In that scenario, your mortgage loan becomes much higher than the actual value of the house. Whether you are a genuine home buyer or an investor looking to make some money, being upside down is probably one of the least desirable predicaments.

With investors already trying to sell off their properties and cut their losses and buyers having a difficult time getting mortgage loans, home values are plummeting every month and homeowners are worried that the difference between their mortgage loan and actual home value will continue to increase to the negative.

Of course, much of the fear among homeowners can be contributed to the lack of knowledge of how they can adjust their mortgage payments to cut their losses for the time being. The fact remains that most homeowners, especially in California, have an adjustable mortgage on their homes and banks want to work with homeowners before the loan adjusts and the payment is no longer affordable. Because banks are extremely keen on avoiding foreclosure, they are open to a home loan modification for their customers.

Organizations like California-based The Loan Modification Foundation have been providing the free consultation to homeowners educating them about their options and how they can proceed with a home loan modification. In fact, these organizations do not even charge a fee until the home loan modification is approved and they take care of the entire application process and negotiation with the bank. The results have led to loans being modified in addition to helping several families from losing their home to foreclosure.

The banks know that avoiding foreclosures is a win-win situation for both them and the homeowner and hence all of the financial institutions are open to discussing a modified mortgage plan. Home loan modifications not only help maintain financial stability but in the long run, loan modifications give incentive to homeowners to stay in the home while home values continue to fluctuate. Many analysts maintain real estate is still one of the most secure investments if you have a long-term view and holding capacity.

Instead of panic and uncertainty due to job losses and a weakening economy, homeowners should concentrate on getting a home loan modification approved by their lenders which will give them the much-needed relief and help them save their homes. With free consultations available, many would argue that struggling homeowners have nothing to lose by trying to improve their financial situation.