A lot of people who were unexpectedly laid off or otherwise caught unemployed at the worst possible time have turned to loan modification from their banks. Loan modification programs help them get current on their monthly mortgage payments and avoid foreclosure. But how long does a home modification loan last for unemployed people?
When your loan is modified, it means that the terms of your loan are actually changed. Your bank decides what methods they are going to use for your loan modification, but here are some of the most common methods and how long they last:
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The interest rate is lowered for a specified amount of time - this is usually about 5 years. At this point it returns to its original rate (check your loan modification details on whether it gradually eases into the original interest rate or immediately jumps up.) The loan term is extended - this lasts for the life of the loan. Let's say you have a traditional 30-year loan: most lenders let you extend the loan by 10 years. This means you'll pay more in interest over the long term, but it lowers your payments and is a permanent solution. (You can always refinance to a better loan once your finances improve.) Principle balance on your loan is forgiven. This is pretty rare, but has been known to happen. In most cases, falling house prices have trapped the homeowner in an upside-down mortgage, where the amount he owes is worth more than the house is currently worth. Forgiving principle is permanent. Late and delinquent payments are forgiven. This solution can be either temporary or permanent, depending on how your lender writes it into the contract. They may tack your missed mortgage payments onto the end of the loan, or they may just forgive them altogether. The latter is more rare, but they just might do it if you ask.
Now, onto the question of being unemployed. Your loan modification doesn't depend on your employment or unemployment status per se, but it does depend on whether you've got a source of income so you can make payments on your modified loan. Is there another wage earner in your household? Are you receiving disability?
When you apply for loan modification, you'll need to send all of your financial paperwork and copies of all your monthly bills and expenditures to your bank. They'll be looking carefully to evaluate whether you still have enough left over to pay a monthly payment on a modified loan. If you are unemployed, make sure to provide documentation that shows what you are living on right now. If your application leaves doubt in the mind of the reviewer that you'll be able to avoid foreclosure even with the help of loan modification, your application will almost certainly be denied.
Some solutions last for the life of your loan, but some of the most common types of modifications only last for 5 years. Loan modifications are only meant to be short-term solutions to help you get back on your feet and buy you time to catch up your payments.
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