Is Mortgage Rate Modification Worth It?

Mon, Apr 28, 2008

Loans

My bank recently presented me with a by phone offer to enroll in their mortgage “Rate Modification Program”. What I gathered from my conversation with the representative is that the bank is offering this in order to encourage folks to stick with them through the tough market. Since I currently have an adjustable rate mortgage and since my home’s value has decreased over the past year or two I’m stuck in a position where refinancing is going to be difficult. What they are offering me is a 6 month term in which they temporarily reduce the interest on my mortgage by 50% or more which drastically reduces my monthly payments. They insist that there is no catch to this offer but it sounds to me like something that is too good to be true. I’d love to save the money but I don’t want to adversely affect my credit, is it worth it?

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3 Responses to “Is Mortgage Rate Modification Worth It?”

  1. sergik12 Says:
    April 29th, 2008 at 9:01 am

    I honestly think they are trying to bribe you. Since the price of your house is less then your mortgage you have all the incentive in the world to walk away from the mortgage. If they give you a discount for 6 months and hope that the price will start climbing then they won’t be stuck holding a worthless property. I would do a little more research if I was you but the deal sounds like a good idea.

    Reply

  2. pbucelwicz Says:
    April 29th, 2008 at 11:13 am

    It’s true that contract modification with your existing lender is viable, but this is not always the case.

    Contract modification is actually a simpler and less costly route to take. And lenders are open to this option. It is after all better than losing their borrowers to a competitor. Problem is, not all lenders hold this option. As a matter of fact, only a very small percentage of lenders hold the right to modify contracts.

    Why is this so? The reason behind this is that most mortgages are serviced by lenders or firms that don’t own the loan. And most often than not, owners don’t give these servicing firms the discretion to give out contract modifications.

    – http://www.squidoo.com/RefinanceMortgageQuestions

    Sounds like this is a good option for you, and the reason your bank is pushing this option on you is because they are afraid you will try to refinance and go elsewhere. I think taking advantage of this offer can’t hurt you.

    Reply

  3. Get A Mortgage With Good Or Bad Credit Says:
    July 17th, 2010 at 5:56 am

    Since we’re talking about subjects in the area of Is Mortgage Rate Modification Worth It? | Personal Finance Questions and Answers for Young Professionals, The disadvantage of this type of mortgage could be that if the Bank’s Base Rate falls you will not benefit from lower payments.

    Reply


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