Decoding Loan Modification
In order to understand the content of a loan modification agreement and its significance, it’s important to know which situations lead to a loan modification and also what it entails. In some situations, a loan modification is an option that can ease your payment commitments to comfortable levels with altered terms of your mortgage loan. While not altering your total liability on account of your mortgage, this involves redistribution of the payments. Throughout this process, it is better to take help from a loan modification firm.
The content of a loan modification agreement
Though certain content of loan modification agreements could be customized depending on the borrowers’ situations, few things constitute a part of the standard agreements which include:
Outstanding loan amount: This is the total loan amount payable by you to the lender on the date of agreement.
Revised interest rate: In most of the loan modification cases, the lenders revise the interest rate which often varies over time. If the interest rate is variable, the loan modification agreement would also include the period relevant for different interest rates applicable.
New principle: This is the amount that you will pay monthly, based on the modification agreement terms, minus interest, etc. The new principle amount will always remain equal to the residual period of the agreement.
Maturity date: This date defines the revised date by when the entire loan outstanding will be paid fully and when the modified loan repayment period will end.
Covenants: This is one of the crucial sections that cover the relevant obligations, including penalties applicable in case of defaults by you to the lender.
Like any mortgage agreements, a loan modification agreement covers the terms of arrangements made between you and the lender; in the context of the pre-entered mortgage loan requiring revisions considering some difficult situations your are going through. Taking assistant from a loan modification expert can save you from this hassle.