Remember How to Restructure Your Loan Permanently

Posted on June 17th, 2009 by saman

For older homeowners, a temporary forbearance may not solve their financial burdens, long term. They may need to structure their loans until the end of the mortgage term, instead of, just a couple of months.

The lender would rather keep the borrower in the home, and accept lower than the said mortgage, if the property went up for sale. As borrowers learn their rights, there is more rights being fought for, and won, in bankruptcy court, and of course, the lender looses out completely, if they do not negotiate a new payment plan.

There has been much success with the restructuring of mortgage payments with these types:

a) By capitalizing certain delinquent payments on the top of the recent principal balance, by permitting the customer to repay those late payments slowly over the entire loan’s term

b) Decreasing the interest rate years, thereby, reducing the monthly due payments without increasing the term of the loan term.

c) Allowing the borrower up to four years to repay by way of installments, without creating additional cost for delinquent amounts

d) Reducing the monthly payment and lengthening the term of the loan, while increasing the interest payments, over the term

e) Changing collateral, by substituting more valuable property, or other assets, as this would be at risk of foreclosure, but the home would be protected

f) Combine the above forms of restructuring

Homes financed prior to 1980 with a high interest rate, refinancing at a lower rate with a longer payment term will reduce monthly payments. Refinancing a high interest second mortgage into a low interest first mortgage is one way to lower payments.

The one disadvantage to refinancing are the increased finance charges that result from extension of the repayment term, additional closing cost, paying points, and prepayment penalties from the old mortgage. Be aware, there are a lot of scams, and frauds, who make promises that may look legitimate, but may turn out costing the homeowner outrageous cash, putting them deeper in debt.

Finance agencies and mortgage companies are not known to make homeowner loans at fair rates and terms. Financing depends on whether the borrower can get a fair rate. You can find them with legitimate mortgage companies, credit unions, commercial and savings banks.

Home appraisals are great for providing the borrower with marketability and possible sale price. Selling the home may be necessary, the borrower may choose to do it himself or herself with a Realtor, or let the bank sell it and suffer the consequences. The home can be sold before foreclosure procedures are completed.

e) Filing for bankruptcy

A bankruptcy can stop the foreclosure process and give the borrower time to restructure their finances and save their home. An attorney will help the borrower find the best solution to meet their financial needs.

f) Using the deed in lieu of a foreclosure

This is good when dealing with a foreclosure. The deed can be given to the creditor. By using the deed, the borrower may forfeit rights to the equity for the property. If the home’s value exceeds the amount of debt, the borrower may ask the creditor not to pursue collection procedures.

If the borrower has legal claims or a defense against the lender, it could be used as a way to keep from giving up the deed. The lender should give time to vacate the home with an offer with written consent, when the deed in given up.