The current economic pinch has everyone scrambling for the fastest and most manageable solution to their ever-growing financial problems. It almost goes without saying that most people will resort to mortagaging their homes just to try to make ends meet, seeing as how more and more people are now subscribing to the adage that desperate times call for desperate measures, In a manner of speaking, taking out a mortgage on one`s home could be seen as a desperate measure. But what does a homeowner do if, even after taking out a mortgage on their home, they are still in desperate need of money? Does the solution to this secondary crisis lie in a loan modification? Or will taking out a second mortgage be the solution to the problem?
Many will say it will all depend on how you are able to manage your loans. If you are the type who is able to budget wisely, prioritize payment of loans over everything else, and is actually able to pay the due amount on time, then maybe you can do well with taking out a second mortgage on your home without fear that it will get foreclosed. Others will insist that getting a loan modification would be better for you in the long run because this way, you are able to absolve all your debts, albeit in a rather lengthy fashion. How do the benefits of a loan modification weigh against remortgaging anyway? Here is a look at the benefits between the two.
Decrease the payment amount due on the mortgage - Remortgaging is a common way of trying to bring down the current mortgage payment, that is, if you are successful in renegotiating the remortgaging. This will necessarily mean that you will have a longer payment period, although in many cases it ends up in a choice between remortgaging or losing your home. A loan modification is largely similar to this, as there are some arrangements that can be made after a successful application for a loan modification that can result in lower interest rates in the payment, and likewise, a successful loan modification arrangement means you get to keep your home.
Decrease the duration of the mortgage - People who often take out a second mortgage often do so just to pay for the first mortgage, ensuring that they pay off the first mortgage as much as they can, mainly to avoid having to pay for the monthly interest rates. This, however, necessarily means that the monthly payment could be higher. A loan modification, on the other hand, is made to primarily prolong the duration of the loan, allowing the homeowner who took out the loan more time and a longer timeframe to pay the amount. It doesn`t make sense to apply for a loan modification if all the homeowner intends to do is to settle the entire debt at the soonest time possible.
Convert some of the equity earned into cash - A lengthy payment on mortgage usually ends up in equity, and this equity can often be converted into cash, which can then be used to finance other expenses. A loan modification does not generate any equity that is convertible into readily available cash.
These are just some of the differences between remortgaging your home and applying for a loan modification. Each arrangement has varying perks and quirks, and it all boils down to what particular arrangement is more manageable to the homeowner. Bottomline is, regardless which of the two arrangements the homeowner chooses, both are solutions designed to help a homeowner stop foreclosure on their home.
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