Loan Modification - Answers to Frequently Asked Questions
One of the solutions offered to homeowners in danger of losing their homes is loan modification.
Loan modification is a process in which the terms of the mortgage contract are modified or changed in a way that makes it easier and more affordable for the borrower to make payments.
Modifying the contract terms and agreement may be done by lowering the interest rate, extending the term of the loan to adding the missed payments to the principal balance.
Loan modification may also mean lowering the principal balance by canceling out a portion of the debt.
If you are worried, though, that the portion of the mortgage principal that is reduced through loan modification is taxable, the answer is no.
Under the Mortgage Forgiveness Debt Relief Act of 2007, it is stated that the forgiven debt may not be included from income in calculating the federal tax you owe, nonetheless it still must be reflected on your federal tax return.
If you want to qualify for a mortgage modification, you must be able to prove that you indeed have had difficulty in making payments, say after losing your job or some other unfortunate circumstance, and you must also make the impression that you are sincere in your resolve to pay off the mortgage once it has already been modified.
In order to qualify for a modification, your mortgage loan must be more than the value of your home.
However, bear in mind that there are people who apply for loan modification but do not get approved.
There are several reasons to this, but one of the most obvious is the fact that many applicants are unable to submit enough proof to prove that they can pay the mortgage following loan modification.
Since applying for loan modification almost always involves negotiating of some sort, it may work well to your advantage to hire the services of a lawyer.
Many lawyers are well-trained and experienced when it comes to negotiation.
Many lenders are, in fact, ever mindful of the lawyer's proposals for fear of a court litigation which can be more costly.
While declaring bankruptcy may stop foreclosure, it should be considered only when there is no other way out.
You see, bankruptcy can have a negative impact on your credit report for a period of ten years, which can make it more difficult for you to buy another home, get life insurance, or to even simply get a job.
Loan modification is a process in which the terms of the mortgage contract are modified or changed in a way that makes it easier and more affordable for the borrower to make payments.
Modifying the contract terms and agreement may be done by lowering the interest rate, extending the term of the loan to adding the missed payments to the principal balance.
Loan modification may also mean lowering the principal balance by canceling out a portion of the debt.
If you are worried, though, that the portion of the mortgage principal that is reduced through loan modification is taxable, the answer is no.
Under the Mortgage Forgiveness Debt Relief Act of 2007, it is stated that the forgiven debt may not be included from income in calculating the federal tax you owe, nonetheless it still must be reflected on your federal tax return.
If you want to qualify for a mortgage modification, you must be able to prove that you indeed have had difficulty in making payments, say after losing your job or some other unfortunate circumstance, and you must also make the impression that you are sincere in your resolve to pay off the mortgage once it has already been modified.
In order to qualify for a modification, your mortgage loan must be more than the value of your home.
However, bear in mind that there are people who apply for loan modification but do not get approved.
There are several reasons to this, but one of the most obvious is the fact that many applicants are unable to submit enough proof to prove that they can pay the mortgage following loan modification.
Since applying for loan modification almost always involves negotiating of some sort, it may work well to your advantage to hire the services of a lawyer.
Many lawyers are well-trained and experienced when it comes to negotiation.
Many lenders are, in fact, ever mindful of the lawyer's proposals for fear of a court litigation which can be more costly.
While declaring bankruptcy may stop foreclosure, it should be considered only when there is no other way out.
You see, bankruptcy can have a negative impact on your credit report for a period of ten years, which can make it more difficult for you to buy another home, get life insurance, or to even simply get a job.