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Mortgage modification and debt relief services seem so complicated a subject that only experts should venture into them. After all, we are used to having complicated subjects controlled by experts and rightly so. If you need brain surgery you want a brain surgeon not a mirror and a drill. If you are on the death row you want the best kickass lawyer to defend you not a $100 suit and a prayer. You get my drift, it does seem reasonable to think that if you are in deep trouble with debt a debt relief company would be just what you need. They can talk tough with the “evil” banks and find all the loopholes there are to reduce your debt.

This does sound logical and it is true that good debt relief companies can simplify the operation and what is often more important get the information to the debtor who sometimes is not aware of his/her options.

Having said that debt relief is not brain surgery or a court of law, there are many things you can do for yourself instead of a debt relief company, sometimes much better.

This article will analyze three tips you can follow yourself with a brief comment on why it is a good idea.
1)    Continue to make your minimum payments. This tip works great for credit card debt not so easy for mortgage payments. Nevertheless you should always do your utmost to keep minimum payments that show your creditor you have the desire to pay. This will avoid you becoming a delinquent debtor which will save your credit record from being reduced to zero. Bad debt relief companies will often ask you to change your address to that of their office and that they will deal with the payments. This more often than not means they will not pay the bills, letting them mount up as long as you are paying their outrageous fees. Bottom line, whether you are using a debt relief company or not you should keep up with payments.

2)    Talk to your bank’s debt settlement department. This department deals with requests from debtors that cannot meet their payments. You should talk to them before you have become delinquent, i.e. behind in your payments. You must make it clear that you really want to pay the entire debt but cannot under your current financial situation. Banks don’t generally enjoy writing off debt that rightly belongs to them but if you set out your case clearly and honestly they might be willing to reduce your principal to make your monthly payments more affordable. You must always be completely honest with your bank. They know more about your finances than you do and will spot a lie. Work with them to find a solution.

3)    Become a negotiator. Whether you are calling your bank to reduce your interest rate or their  debt settlement department to reduce the debt be prepared to negotiate. Y ou must be patient and polite at all times. After all it was you that asked for the loan in the first place and agreed to their conditions. It might not be your fault that you are in the pickle you find yourself but it is even more likely it is not the bank’s fault. Something in your favor is that banks understand that many people have been hit by the financial crisis and can honestly not meet their current debt payments, heck most banks needed a bailout in order to survive. The keyword you need to remember is “negotiation”. Ask for a large settlement of your debt, when they decline with another offer reduce yours a little and continue working with them until you find a solution you can live with.

4)    Don’t be unrealistically optimistic. Your credit record is going to be hit and hard. You will not be able to get competitive loans for a while and that is probably good as it will give you a chance to get on your feet before you can get into debt again. A good idea when everything else has been tried is debt consolidation. This means taking out a large loan to pay for all your outstanding debts. This loan is normally of a higher interest than a mortgage but lower, much lower than credit card rates.

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Mortgage modifications have received a lot of publicity in the media due and with good reason, millions and millions (4-5 according to government projections) will be left homeless if they don’t make appropriate loan modifications to their mortgages.

However that does not mean that loan modifications are only for the poor and destitute. We can all take advantage of the historic low interest rates and modify our loan or mortgage. Of course this is not an option that will help everyone, in some cases loan modifications cost more than they save and the only benefit they provide is to reduce monthly payments in exchange of a huge increase in interest payments throughout the life of the loan.

How can you can find out if your are eligible for a loan modification that will save you money?

1)   Check the cost.

It doesn’t get much more basic than this but it is vital that we check the price tag before we buy it. To illustrate you might have heard about companies that install solar panels to save money on your electric bill. I actually looked into one of these systems for my home and when you put figures onto paper it would have taken decades to cover the cost of my investment. I happen to believe that solar panels would be a great idea and that all new homes should be forced to have them, but you get my drift, before you “purchase” a product that provides a saving it is wise to work out exactly how much you are saving.

2)    Are you planning to sell soon?

Loan modifications take time to pay off the initial cost of purchasing the mortgage modification, often two to three years. If you are planning to sell soon you might lose money.

3)  Have you had your mortgage for a long time?

Mortgages are set so that at the beginning of the loan you pay most of the interest of the mortgage while paying most of the principal towards the end of the mortgage’s tenure. For example in the first 5 years payments tend to be broken up in 85% to pay for the interest of the mortgage and 15% towards the loan’s principal. If you modify your loan, your outstanding loan will be reset and you will begin to pay mostly interest with your monthly payments again. This could actually reduce your equity and provide little or no benefits. Therefore if you are in the final years of your loan it might be best to stay put.

Loan modifications are generally best suited for people who have recently bought the mortgage, are planning to own the home for a long time and who have excellent credit ratings. Nevertheless it is always a good idea to contact your bank and tell them you are seriously considering refinancing your mortgage, if you are a good customer they are likely to bend backwards to keep you on their portfolio whatever your circumstances are.

Related posts:

1. Mortgage Modifications, Mine Field Or Land Of Milk And Honey
2. Are mortgage modifications cost effective
3. Are Loan Modifications Worth your time

Related posts:

1. Mortgage Modifications, Mine Field Or Land Of Milk And Honey
2. Are mortgage modifications cost effective
3. Are Loan Modifications Worth your time