Posted By Serge LeMans on January 17, 2015
You modify a loan because you want to get the best deal possible, under the current situation. For example: you might have average credit ratings at the time of loan approval; the economy might have been in distress; the bank/lender did not offer any promotional deals; you just got a pay raise or a new job. Each of these circumstance, and more, positively affect your chances of getting a better deal. Simply put, if you are earning more and the economy is getting better, then it is time to look into Long Island loan modification.
-From Whom Should I Ask a Modification of my Loan?
Strictly speaking you want to ask your current lender/mortgagee for a Long Island loan modification. This is because this is the entity who can grant a modification of a current loan. You start the process by giving your lender a call. The number is located in your loan documents. Schedule an appointment. This way you are sure you are talking to the right entity.
-What Should I Bring During My Appointment?
First, you want to bring your loan documents. This is not really a necessity, but it can save you time. Second, you should bring at least 2 valid identification cards. Third, you should bring a credit report that was pulled out at most 6 months prior, but preferably within the month. Fourth, bring 3 to 4 months of your payslip or any proof of income.
-What Should I Look Out for?
First, you want to make sure that any modification option given you is really to your advantage. Don’t be fooled by instant low interest offers. Ask first what kind of modification that is. As a general rule, steer clear from adjustable rate mortgages.
-What is an Adjustable Rate Mortgage (ARM)?
An ARM is a Long Island loan modification interest payment scheme that initially provides the borrower with low interest rates. The catch is, after a fixed period of 1 to 5 years of low interest payments, the bank is then allowed to recomputed your interest payments based on a specific index. In most cases, this will result in an interest rate that is higher than most fixed rate mortgages. What is more, the interest rate you pay is recomputed at specific intervals. This has the potential of increasing your interest rate several times, albeit with a stated increase cap.
-What are the Types of Long Island Loan Modification?
For a change in your loan documents to be considered a modification, it must be a substantial change. As a general rule, loan modification has 4 major types. This includes but is not limited to:
a.Change in interest rate: This change can be the rate payable and/or the type of interest rate i.e. fixed, ARM, Balloon, etc.
b.Change in loan terms: This change can be anywhere from decreasing/ increasing the number of payments to be made; adding/removing clauses i.e. acceleration clause; or any other substantial change in the terms and conditions of payment.
c.Change in the principal payment: This refers to the actual loan amount and/or instalments that are used to pay for such. It can be increased or decreased depending on certain circumstances i.e. you make a lump sum payment.
d.Moving the payment period: This is a very popular option for temporarily distressed households. For example: you are not able to pay 5 instalments because you lost your job. Fortunately you now have a new job and it pays just a s good, if not better. Instead of paying penalties and the total amount defaulted, which is very substantial, you can ask the lender to move the payment period backwards by 5 more months.