Difference Between Reinstatement and Modification of a Home Loan or Mortgage

The difference between reinstatement and modification is, the first option requires you  to pay the arrears whereas modification requires changing the payments to suit your situation.

How Does it Work?

You will get a letter from the lender that you need to pay back all the arrears, penalties and legal fees, which is commonly known as a reinstatement of the loan. If you are unable to do so, engaging a loan modification attorney to modify your loan might be the best option.

The lender will make these demands because you have defaulted on the terms. If this huge amount is not settled, they will start the foreclosure procedure. In order for you to keep your home, you need to consider modifying the loan.

The problem is that you might not be able to pay this huge sum at once; therefore, you need to change the wording of the loan agreement known as loan modification. Getting the assistance of a loan modification company, such as Loan Modification Depot is probably the safest way to negotiate a new loan.

Why Lenders Consider a Loan Modification

You might be thinking that why not just sell the home, but a loan modification expert will explain there are a number of expenses the lender will face.

  • Foreclosing on a home requires to go through the court, which is expensive
  • The market value of your home is probably not as high due to the current economic situation.
  • Looking after the home while it is empty and paying a realtor to sell the home attract commissions and other costs.
  • Lenders also borrow money to finance their business; therefore, this needs to be paid back.
  • It cannot be used as an asset while it is on the market, creating criticism from the government regulators.

Loan Modification

Basically, the lender wants their money back which is not going to cost them and with loan modification options, they are able to do that. During the loan modification mitigation, they will be able to change the terms to suit your situation; enabling you to keep your home.