ByOswin Grant 
Why do some homeowners refinance and others do a loan modification. There might be a lot of reasons driving their decisions. I will discuss some of the key differences between a loan modification and a mortgage refinance. They both can be beneficial to someone with a high mortgage payment, and so they need help with one of the two options to lower their mortgage payment. They have similarities and differences alike.
A refinance is simply completing the process of acquiring a new loan for financing your current mortgage. When you do a refinance you will have to run your credit to make sure you meet the minimum requirements in order to be eligible for the new mortgage loan you are requesting. You will have to provide proof of employment, meet a minimum income requirement, have a favorable payment history, in addition to other requirements. When you do a refinance you are paying off your old loan with a new loan, and starting over again. You can take out equity in the property or leave it in, you can often do a 15yr or 30yr mortgage. You might want to do a refinance with a cash out, and pay off other high interest loan such as credit card , revolving store card , other loans, finance college, buy a new car, among other things. When doing a refinance you credit score and payment history will be weighed heavily in the final determination to grant you credit, or whether to deny you.
Most refinance will take anywhere from about 2-4 weeks to complete and your old mortgage lender will be paid off. Homeowners will often refinance when the interest rate is at least 1 percentage point lower than what they are currently paying. It's good to refinance if you intend to stay in the home for at least another 5yrs. The reason why it's not a good idea to refinance if you don't plan on staying in the property for at least 5yrs more years is due to the fees and closing costs associated with doing a refinance; It is like getting a new loan, in fact that is exactly what you are doing.
Loan modification is similar to a refinance because it is actually lowering your mortgage interest rate to give you a lower house payment. However, there are some key differences. A loan modification is not focused on your credit score or credit history as much, if at all. In fact, some loan modification don't ever check your credit history, a small number of lenders do check, but your credit is not weighed much at all for granting you a loan modification. When you do a loan modification you will almost never get charged anything, and if you do they are minor charges that are rolled up in the mortgage balance, unlike a refinance. Many people that apply for a loan modification are often is deep trouble with their mortgage payments, they commonly have a poor credit history, and will often not qualify for a refinance. Not to say a refinance is better that a loan modification, but a lot of homeowners that do a loan modification do it as a last option. Homeowners that do a refinance do it because they have a choice, and they can try to use their good credit history to their advantage by getting a lower mortgage payment. Ironically, a refinance and a loan modification will often give you a much lower mortgage interest rate over your prior interest rate, and yet the requirements for getting them can be so different. One of the disadvantages of a modification is not being able to have a cash out option whenever the homeowner does it; With a refinance a cash out option does exists. Once the loan is modified the loan will start over again with good credit reporting showing up with the credit bureaus.
So you are having to pay closing cost that will take a few years to recover from before you actually start seeing some real savings. You would not need to refinance if you are not going to get a lower interest rate of at least 1 point, it would not be worth it in the short term. If you need to cash out without refinancing or selling the property, you might want to consider a Home Equity Line Of Credit(HELOC), it's like a kind of revolving credit that your home serves as collateral for that loan. You can get access to the funds all at once, or over a period of time.
So keep in mind that is not so much whether you did a loan modification or a refinance, because the end results are often very similar. The key is to get your mortgage payment lower by any means assessable and necessary to you. You will be happy you did it when you are suddenly paying a lot less than you ever did. [http://hstrial-oswingrant.homestead.com]
Article Source: by oswin grant
Why do some homeowners refinance and others do a loan modification. There might be a lot of reasons driving their decisions. I will discuss some of the key differences between a loan modification and a mortgage refinance. They both can be beneficial to someone with a high mortgage payment, and so they need help with one of the two options to lower their mortgage payment. They have similarities and differences alike.
A refinance is simply completing the process of acquiring a new loan for financing your current mortgage. When you do a refinance you will have to run your credit to make sure you meet the minimum requirements in order to be eligible for the new mortgage loan you are requesting. You will have to provide proof of employment, meet a minimum income requirement, have a favorable payment history, in addition to other requirements. When you do a refinance you are paying off your old loan with a new loan, and starting over again. You can take out equity in the property or leave it in, you can often do a 15yr or 30yr mortgage. You might want to do a refinance with a cash out, and pay off other high interest loan such as credit card , revolving store card , other loans, finance college, buy a new car, among other things. When doing a refinance you credit score and payment history will be weighed heavily in the final determination to grant you credit, or whether to deny you.
Most refinance will take anywhere from about 2-4 weeks to complete and your old mortgage lender will be paid off. Homeowners will often refinance when the interest rate is at least 1 percentage point lower than what they are currently paying. It's good to refinance if you intend to stay in the home for at least another 5yrs. The reason why it's not a good idea to refinance if you don't plan on staying in the property for at least 5yrs more years is due to the fees and closing costs associated with doing a refinance; It is like getting a new loan, in fact that is exactly what you are doing.
Loan modification is similar to a refinance because it is actually lowering your mortgage interest rate to give you a lower house payment. However, there are some key differences. A loan modification is not focused on your credit score or credit history as much, if at all. In fact, some loan modification don't ever check your credit history, a small number of lenders do check, but your credit is not weighed much at all for granting you a loan modification. When you do a loan modification you will almost never get charged anything, and if you do they are minor charges that are rolled up in the mortgage balance, unlike a refinance. Many people that apply for a loan modification are often is deep trouble with their mortgage payments, they commonly have a poor credit history, and will often not qualify for a refinance. Not to say a refinance is better that a loan modification, but a lot of homeowners that do a loan modification do it as a last option. Homeowners that do a refinance do it because they have a choice, and they can try to use their good credit history to their advantage by getting a lower mortgage payment. Ironically, a refinance and a loan modification will often give you a much lower mortgage interest rate over your prior interest rate, and yet the requirements for getting them can be so different. One of the disadvantages of a modification is not being able to have a cash out option whenever the homeowner does it; With a refinance a cash out option does exists. Once the loan is modified the loan will start over again with good credit reporting showing up with the credit bureaus.
So you are having to pay closing cost that will take a few years to recover from before you actually start seeing some real savings. You would not need to refinance if you are not going to get a lower interest rate of at least 1 point, it would not be worth it in the short term. If you need to cash out without refinancing or selling the property, you might want to consider a Home Equity Line Of Credit(HELOC), it's like a kind of revolving credit that your home serves as collateral for that loan. You can get access to the funds all at once, or over a period of time.
So keep in mind that is not so much whether you did a loan modification or a refinance, because the end results are often very similar. The key is to get your mortgage payment lower by any means assessable and necessary to you. You will be happy you did it when you are suddenly paying a lot less than you ever did. [http://hstrial-oswingrant.homestead.com]
Article Source: by oswin grant
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