When Mortgage Modification Isn’t Right

Despite the array of benefits available with a mortgage modification, the truth is they aren’t for everyone. Depending on conditions with your home and your financial situation, you could find that a mortgage modification isn’t going to provide the kind of help you need.

Considerations

As an alternative to foreclosure, mortgage modifications are a great option and certainly one to be considered with your lender. However, there are other options available to you, such as refinancing or a short sale, that could better suit you.

If your home is underwater, meaning you owe more than the home is currently worth, you may find it difficult to be approved for a mortgage modification. Modifications such as a principal mortgage write down may not be in your  best interest because the written down by the lender could become your responsibility at tax time. In other words, you could be liable for paying taxes on this amount. Second mortgages only complicate the situation when you receive a write down or elimination of the second mortgage loan leaving you fully responsible for the original loan, which is not likely to receive any further assistance from the lender.

If your financial hardship is expected to last more than a few months, a mortgage modification may not be able to lower your payments enough to help. If your hardship lasts longer than 6 months, a reduction in your monthly payment due to a modification cannot ensure that you will be able to maintain your payment long term. If you were to obtain a modification and then suffer further financial troubles, you are not likely to receive additional help from the lender and could end up at risk for foreclosure anyway.