Diff. btwn refinance & loan modification (interest rate, foreclosure, credit report, fees)

[brandy76]

What's the difference between these two?

I purchased a home with my boyfriend 2 years ago and both of our names are on mortgage. Now we're breaking up and he's willing to forfeit everything to get his name taken off the mortgage. and put everything in my name

Which should I apply for refinance or loan modifciation. Will both these options lower my mortgage. Is this a difficult process?

[mortimer]

Originally Posted by brandy76

What's the difference between these two?

(1) A regular refinance is unobtainable for most people.
(2) A modification is theoretically obtainable for anyone, but almost no
one ever gets one - it just generates fees for the banks from the taxpayers
each time a mod is attempted. You are encouraged by the bank to keep trying.

Seriously, the mod is for people who are "in distress." This isn't what you are looking for.

If you have equity in the place, you can get it refinanced, but since the
original loan was made based on your combined ability to pay, getting the
loan refinanced in your name only might require coming up with some cash.

If you alone, make plenty to pay the monthly payment, it might be doable, but only if you have equity.

( it might )

Originally Posted by brandy76

Will both these options lower my mortgage.

Do you mean lower your mortgage payment?

It might. If your old rate is higher than your new rate your payment will go down.
Since you have only been paying on the mortgage for a couple of years, your balance
is probably not significantly lower, so that's not going to have much of an effect.

Note that refincing will also cost several thousand dollars.

Note also that sometimes, when attempting a mod, the bank will come up with a higher
new payment for the sucker attempting to get the mod. They probably have a good laugh
over this back in the office. I can't imagine anyone in all seriousness doing this unless it
was for laughs or cruelty, but it seems to happen in some cases.

Originally Posted by brandy76

Is this a difficult process?

They will probably make it difficult for you, yes.

If the price/value of the property has dropped, a likely prospect, it will be more difficult.
If you can't come up with more cash, it will be more difficult.
Have you ever been late with a payment during these last two years?

It might be easier to sell the place and then buy something else on your own.

[SmartMoney]

A refinance is taking ownership of your debt.

A modification is asking for something for nothing.

[Modification Specialist]

Originally Posted by brandy76

What's the difference between these two?

I purchased a home with my boyfriend 2 years ago and both of our names are on mortgage. Now we're breaking up and he's willing to forfeit everything to get his name taken off the mortgage. and put everything in my name

Which should I apply for refinance or loan modification. Will both these options lower my mortgage. Is this a difficult process?

Hi Brandy

See your in NJ, I'm in LI, my home is still without power for the last five days from the Hurricane..... You guys very got hit with all the flooding......

The answer to your question - to get someone off the title your going to either sell or refinance your home.

A loan modification is for homeowners that are facing a hardship, to have their loan restructured. In most cases - if the husband and wife are on the loan, both need to be listed the application for a modification. If you have a low rate already and not behind on your mortgage payments - causes are you will be denied.

I am not saying to go late - because it will screw up your credit if you have mortgage lateness's on your credit report.

As a last resort if you and your husband cannot make up. Doing a Deed in Lieu of foreclosure will have the least damaging effect to your credit and your financial future.

That involves giving the home back to the bank and you walk free and clear. 1st the bank will have to deny you for a modification. Then 2nd the home is listed for short sale for 90 days.

I can empathize with your frustrations with parting with your spouse.

Good Luck

[mortimer]

Originally Posted by SmartMoney

A modification is asking for something for nothing.

Not necessarily.

Most modifications that I have seen completed end up with the borrower having to pay
back the entire mortgage balance at a lower, but still market rate. The modification
process is paid for by someone else, but a loan mod is nothing like you are describing.

Also, since the banks no longer function like real banks, people with perfectly
good credit and who are current on their loans are being advised by the banks
to go the loan mod route since they are refused a conventional refinance.

I know I was. However, I, likewise, refuse to halt making payments so that I can get a mod.

Funny thing; most loan mods end up going back into default. This result was
totally unexpected. They took only the borrowers who were not making their
payments and assumed that they would become current. They just assumed it.

There is another thread in this forum where the borrower got their loan modified from what
had to be a $3,000+/month burden to a $1,750 payment and they still filed for bankruptcy
even though one of the parties still has a good state job. It's a great program!

Another funny thing; a "current borrower" can apply as many times as they want
for a loan modification and, after denial, the bank will encourage another try at it.
This is because they get money each and every time they deny an applicant.

In a way you are right. The banks are getting something for nothing. They are getting it over and over.

The loan mod program was financed with $75B of taxpayer dollars.
I assume that no more mods will be made once the hogs have fed and that trough is empty.

It's such a good thing they were bailed out.

I suppose someone like me would be a deadbeat in your eyes had I actually
been granted a loan modification to bring down my ridiculous 6.5% interest rate.

Originally Posted by Modification Specialist

Doing a Deed in Lieu of foreclosure will have the least damaging effect to your credit and your financial future.

I don't think the OP was asking how to get out of the loan. They are looking to maintain the loan, but only in their name.

There is no evidence that they are not able to simply sell the home free and clear.

[chicagojlo]

A loan modification only changes the terms of the loan, usually the rate and in some cases, the length or rarely the principal. You won't be able to get your boyfriend off the loan using this, and as others have said you probably won't qualify. And it is extremely difficult.

A refinance is where you take out a new mortgage, paying off the old one. This is what you'd have to do to get your boyfriend off the old loan, but you'll have to qualify for the new loan on only your own income, and the home must be worth what you are asking to borrow. You will also have to pay closing costs on the new loan. You may get a lower rate but it depends on what you previously paid. If there is equity in the house then it may work out in your favor, but most properties bought in the last couple of years aren't worth more than what was paid for them.

[brandy76]

Thanks for all the responses.

I guess the loan mod won't work for me since I've never been late on a mortgage payment and the distress isn't job loss?? Is that the only type of distress? Does a loan mod mean both names that are on the mortgage have to apply for it? Meaning a loan mod can't be filed in just my name through my mortgage bank?

Refi is def not an option now since I don't have the money to pay for closing costs. Current rate is 4.9%

Selling the house was not an option since I purchased it 2yrs ago for 350K and now it's worth approx 325K. I haven't gotten it appraised, but that's what zillow has it for

[TimtheGuy]

Originally Posted by brandy76

Thanks for all the responses.

I guess the loan mod won't work for me since I've never been late on a mortgage payment and the distress isn't job loss?? Is that the only type of distress? Does a loan mod mean both names that are on the mortgage have to apply for it? Meaning a loan mod can't be filed in just my name through my mortgage bank?

Refi is def not an option now since I don't have the money to pay for closing costs. Current rate is 4.9%

Selling the house was not an option since I purchased it 2yrs ago for 350K and now it's worth approx 325K. I haven't gotten it appraised, but that's what zillow has it for

You can most likely roll any closing costs into the new loan amount or the interest rate. Not having the closing costs in your pocket should not stop you from refinancing.

[SmartMoney]

Actually, the word "modification" had an entirely different meaning prior to the mortgage crisis. Pre-crisis, a modification would be done when someone applied significant funds (typically defined as over 10K) to the principal balance and the loan payments were reamortized to the remaining term. Such principal curtailments were actually quite common and saved thousands of dollars in lieu of a refinance.

As for today's mods, it's very rare to see the consumer repay every dime back. In fact the only ones I have seen do so, pay it back quickly when they realize it's on their credit as "paying less than agreed amount." I just closed one such customer last month.......he paid back over $20,000, but only because he wanted to buy another home. (WF was offering mods telling customers it would not effect credit - fortunately, he had the email from the person that told him that in writing). Once it's paid back, most creditors will immediately issue corrections to the repositories.