Loan modifications have helped thousands of Orlando homeowners to keep their homes.
However, you must be aware of the fine print and know exactly what it will mean to you. Sometimes the terms of a loan modification are often worse than the original mortgage. The best loan modifications are when you are able to not only reduce your payment but reduce the principal balance of the loan. Many loan mods are structured so that your payment gets reduced but you still have to pay off the entire amount of the original mortgage plus penalties. In my opinion, these type of loan modifications are just not worth agreeing to. If your house is only worth $100,000.00 and your loan amount is $200,000.00 why on earth would you want to end up paying that entire amount?
Push for a loan modification with principal balance reduction
Banks will always try to get you to agree to what suits them better, this is why you have to be a tough negotiator, don’t just agree with the first proposal that they put in front of you. You have to remember that banks also want to come to an agreement. It costs lenders a lot of time and money to take someone through the foreclosure process. The best thing you can do is hire an Orlando real estate attorney that specializes in loan modifications. If you try to go at it alone with your lender, it could end up costing you a lot more money in the long run. Sure, a good Orlando real estate attorney may cost you a couple of grand up front, but you’ll have a much better chance if you have an experienced negotiator in your corner.
5 things to watch out for when negotiating an Orlando loan modification
1- Your lender has the option of dropping all penalties. Don’t be bullied into a take-it or leave-it trap where they give you the option to pay off the penalties up front or have them roll the penalties into the balance. You should demand that the wave all penalties as part of the deal.
2- Sometimes lenders will try to get you to agree that if they lose the original loan documents, you must assist the lender in reproducing them. As ridiculous as this may sound, it’s true and you should never agree to something like this. It comes down to the lender having additional legal protection if they screw up. A clause like this has absolutely no benefit to you.
3- Step by step rate increases that are too steep for you to afford or balloon payments that become due before you have time to be prepare for them.
4- Don’t agree to payments that you really can’t afford. When doing a loan modification, the idea is to make the loan affordable to you and your family. Be realistic, don’t put yourself into a position where your budget is soo tight that you’re only one major car repair away from being in default again.
5- Don’t agree to an interest rate that can automatically adjust based on an index over which you have no control.
An Orlando Short Sale may be your best option
As you can see, there are a lot of things that you need to watch out for when entering into a loan modification with your lender. The fact of the matter is that even when you have the banks best offer on the table, it still may not be good enough.
You may be much better off doing an Orlando short sale. At the end of the day, it’s just a house, it’s not part of your family. By doing an Orlando short sale, not only will you be free of your lender forever, but you can get enough cash back to start over and get yourself into a much better situation than you would be agreeing to the terms of a loan modification.
As always, if you have questions about anything to do with Orlando real estate. Call us and set up a free consultation with an Orlando real estate expert.