| Loan Modification is a change in some of the | | | | accumulated equity on the property and have a job |
| contractual terms of a loan that result in a | | | | that is very secure. |
| reinstatement of the loan with different payments that | | | | In the recent economic recession, home equity and |
| are affordable depending on one's financial situation. | | | | loan balances have been negatively affected. For |
| Refinancing means you will continue to pay the current | | | | many people refinancing is not an option. For people |
| debt while agreeing to a new mortgage. There are | | | | who have lost their jobs or are unable to meet their |
| other differences and these are outlined in this article. | | | | monthly obligations, a loan modification is a good |
| Rather than starting a foreclosure proceeding, banks | | | | choice. Perfect credit scores, equity or a job are not |
| and lending institutions would rather work out a loan | | | | required in this plan. The financial institution changes the |
| modification plan with someone who owes them | | | | terms of the loan, the interest rate is lowered and the |
| money. In this case the terms of the loan are changed | | | | monthly payments are manageable. |
| and the borrower is given a new chance to pay back | | | | It is hard to state which option is better, a loan |
| the entire loan. If the loan is refinanced, the terms may | | | | modification or refinancing. They are each meant for |
| be better but there will be several fees and penalties | | | | different situations, and in each case there are pros |
| to be paid. These depend on the actual mortgage. This | | | | and cons. Refinancing can be better for people who |
| is another important difference between the two | | | | have accumulated equity on their property and have a |
| processes, but there are more. | | | | very good credit rating. If you choose to deal with your |
| Even though a loan modification lowers the interest | | | | financial struggles in this manner, and if you qualify, you |
| rate, lenders are becoming interested in it to help with | | | | will probably not be offered a fixed interested rate or |
| the staggering number of homeowners who are | | | | payment reductions. If you choose to pursue a loan |
| struggling with their debts. Banks would rather avoid | | | | modification, you will not be asked to pay any fees, |
| foreclosure and work with the borrower to help them | | | | your credit rating is not a consideration and you will get |
| re-establish their financial situation. Refinancing can also | | | | a lower, fixed interest rate. If you were wondering |
| result in a lower interest rate, but is different in other | | | | what the difference is between refinancing and loan |
| ways. Homeowners, who are applicants for | | | | modification, hopefully you now know. |
| refinancing if they have a high credit score, have | | | | |