Loan Modification VS Pre-Payment Plan

A loan modification is a written change to the agreement between the mortgage holder (or its Servicer) and the homeowner on the original terms of the note.

The goal of the loan modification is to prevent  foreclosure by altering the original payments terms so that it becomes more affordable for the homeowner.

Loan modification programs may be short term or long term but the intention is to allow homeowners to keep up with payments which they can afford and prevent them from going into default.

There are many ways to modify the original loan.

  • Reduce the interest rate
  • Extend the¬† loan term
  • Reduce the principal balance
  • Or a combination of the above

Using these various combination’s the Loan Modification will reduce the payment amount for the homeowner so it is more affordable.

A Loan Modification must not be confused with Pre-Payment Plan.

A pre-payment plan requires homeowners to make increased monthly payments to cure payments that are in Broke business manarrears.

Most pre-payment plans fail because they increase the monthly payment rather than decrease the monthly payment.

Remember if your bank offers you a plan and it will take more money out of your pocket then this is a pre-payment plan that benefits the bank not the homeowner.


If the bank reduces your payment and puts more money in your pocket then this is a good loan modification plan.

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