The Debt Management Expert

Overview
For qualified homeowners that need to renegotiate the terms of their mortgage with their lender, a loan modification is a good option when properties values are dramatically declining. Loan modifications are the best recourse for homeowners looking to renegotiate the terms of their loans, because the homeowner is unable to make payments under the original agreement or because the value of the property is worth less than the homeowner owes on the mortgage. Loan modifications also serve the needs of lenders that would prefer to avoid foreclosure and a sale of the asset at a significantly reduced price.

Refinancing is advisable in a stable or increasing market. It gives homeowners the ability to take cash out when needed, lower their interest rate, and fix their interest rate, among other options. In today’s declining market, refinancing is available to a much smaller group of homeowners — only those who are current with their mortgage payments, have a strong credit history and job security, disposable income after all bills are paid, and significant equity in their property are eligible.

Comparison Shopping
Whether you will be able to refinance or qualify for a loan modification depends on your individual situation. Most homeowners interested in making a move in this market are the ones who are in trouble and therefore do not qualify for a refinance. If you are behind on your mortgage, always attempt a loan modification first. When a homeowner is late but can show the ability to pay a lower payment, the benefits from a loan modification will greatly outweigh that of a refinance. The interest rate on such a loan modification will generally be lower than that of an on-time homeowner with good credit who pays to refinance.

Getting approved for a traditional refinance is extremely difficult. Since Wall Street is no longer purchasing loans from originating banks, lenders have cut programs to less qualified homeowners. When considering refinancing in a market where equity has evaporated, causing balances to exceed value, there is no option to refinance. This is true for all homeowners, sub-prime as well as qualified homeowners.

If you are a homeowner that is upside down, you would have no option to refinance and your best bet would be to seek out a loan modification. If you are not late but are upside down, loan modification companies such as ours can make it a seamless and transparent effort that could potentially knock tens of thousands of dollars off of your principal balance. Who could argue with that?

A  no fee refinance refers to a loan transaction where the lender or your broker bears all the charges such as settlement costs, underwriting fees, title or escrow fees, processing fees, loan origination points, appraisal etc.

So the question is how do they do that? The truth about this type of loan is that the lender bundles all of these closing cost in your loan amount. This increases your loan amount which ends up increasing your payments over the life of the loan. Lenders by law need to dislose this by presenting you with what is called and A.P.R. The A.P.R. reflects the interest rate plus all of the closing costs and thus allows you to do a head to head comparison of various loan solutions. For instance a loan having an interest rate of 6% without fees included could have an A.P.R. of 6.5% once fees are included.

While you seemingly don’t pay these expenses up front, you do end up paying it when you repay your loan. A no fee refi has one big benefit which is that you don’t have to come up with the closing costs and you could save a good amount by lowering your payments if you can get a lower interest rate. That being said, pay very close attention to the fees being charged. Just because they are being rolled into the loan does not mean they do not matter. Negotiate to lower these fees when possible and question excessive sums. Use the A.P.R. as a guide to how much you are paying in fees. The further it is from the quoted interest rate the more in fees you are paying.