A week ago, one of the members in my family called me to tell me that her mortgage company asked her to stop making her mortgage payments so she could qualify for a specific type of mortgage modification. She asked me whether she should do that. The answer is NO.
What Will Happen If I Stop Making My Mortgage Payments to Get a Modification?
You should not stop making payments and if a mortgage company representative tells you to do so, they are wrong. If you stop making your mortgage payments, it will result in serious negative consequences for you, including the following:
Your Credit Score Will Drop.
If you fail to pay your mortgage payments, your mortgage company will report the missed payment(s) to the credit bureaus which will result in your credit score dropping preventing you from easily being able to incur other debts in the future and/or you will be offered higher interest rates debts which would result in your paying more on debt(s).
Your Mortgage Arrears Balance Will Increase.
If you stop making mortgage payments, then you will become past due and the arrears on your mortgage will keep increasing. This entire amount would need to be brought current to save your home if you do not qualify for the modification. This would be a huge problem if you have already spent the money on other expenses.
You Will Incur Late Fees.
For every mortgage payment that you miss, the mortgage company will access a late fee to your account to be collected from you at a later date. You will be responsible to pay these fees.
Applying for a Mortgage Modification
The bottom line is that if your mortgage company is asking you to stop making payment, tell them “No.” If you are struggling to make your mortgage payments and need some help, go ahead and apply for a mortgage modification with your mortgage company. If you meet the qualifications, the mortgage company may be able to lower your interest rate and payment by extending the term of your loan.
If you have been approved for a mortgage modification, make sure that you clearly understand all the terms the agreement. If you don’t, then ask questions.
I have had quite a few clients who didn’t realize that their modifications were actually extending their mortgage term out for 40 years. You should not sign a modification agreement without understanding clearly all the terms within that agreement.
Refinancing May Be a Better Option
If you were able to keep your mortgage payments current, you may be able to qualify to refinance your mortgage rather than modify your existing mortgage.
A refinance is different from a modification because a refinance would actually pay off your existing mortgage and create another one. A refinance does not force you to stick with your current mortgage company but instead allows you to shop around and compare interest rates with other mortgage lenders.
Contact an Experienced Bankruptcy Attorney Today
If you are behind on your mortgage payments and/or you are worried about losing your home, please give your local Bond & Botes office a call today for a free consultation to discuss your options to save your home.
Mary Pool is a shareholder of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Faulkner University’s Jones School of Law. She has represented thousands of clients over her more than 11 years working in the bankruptcy field. Read her full bio here.