Should I modify my loan?

A lot of my CT short sale clients have either considered a loan modification or been turned down for one by the time they have made the decision to short sell.

In a loan modification the lender makes permanent changes to the terms of your mortgage resulting in a more affordable payment. Keep  in mind that while a modification will reduce your payment, it will not reduce the amount you owe on the property. In my opinion, this is the main reason most loan modifications ultimately fail. Loan modifications are not long term solution for anyone with heavy negative equity.

However a loan modification may be a good solution for those who:

• Have a stable financial situation including steady employment

• Do not have significant negative equity in the home, or;

• Are prepared stay in the home for many years to come to overcome the negative equity situation

If you have significant negative equity in the home and see yourself needing or wanting to move within a few years time, a loan modification is not likely to be a good solution for you as the negative equity will remain. A failed loan modification or a forced or desired move in the near future will ultimately lead you right back around to the same choices you face today: Foreclosure, deed in lieu, or a short sale.