Difference between Loan Modification and Refinance

July 30, 2009 - PRLog -- Rancho Cucamonga- As the current economic crisis continues, many homeowners are faced with the tough question of what to do to afford their home, given their difficult loan terms.  Two common options are loan modifications and refinances. A loan modification and a refinance will both reduce monthly mortgage payments and make them more affordable, but there are important differences between the two options.  A loan modification changes the terms of an existing mortgage while a refinance creates an entirely new mortgage.  The appropriate option depends on a homeowner’s particular situation, their credit rating, and their equity position.

The following points compare the differences between a loan modification and a refinance that helps in determining which might be most advantageous and probable:-

•   In Loan Modification appraisal is not necessary whereas in Refinance it holds an important place.

•   Similarly Escrow & Title is not necessary in Loan Modification whereas in Refinance it is a necessity.

•   Credit score holds an important stature in Refinance but is not considered important in loan modification procedures.

•   Lower interest rate is almost always applicable in Loan Modification whereas in Refinance interest rates are subject to current market rate.

•   The completion time for a Loan Modification procedure is between 30 and 180 days and a refinance takes completion time that is between 30 and 60 days from the day it is approved.

•   Home equity: The drop in value in loan modification is beneficial so that the lender will not benefit as much from foreclosing on the property as compared to Refinance where drop in value may disqualify. Given the economic climate, in case of a refinance to take place, borrowers will probably have a hard time qualifying for a loan based on their home equity.

•   In a Loan Modification procedure the involved parties are the same as in the original loan whereas in Refinance the involved parties can be any lender or investor.


When considering a loan modification versus refinance, homeowners must determine whether their particular home value, financial situation, credit score, and loan terms would be better suited to an entirely new loan or amended loan terms.  

For more information on pursuing and obtaining a loan modification, the attorneys could be reached at STONE HAVEN LAW GROUP, LLC at 1 (877) 376 MODIFY and a must visit is a pre-requisite at www.stonehavenlaw.com.

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The Stone Haven Law Group, LLC, a law firm, strives to give the most comprehensive legal advice for particular financial situations and solutions to reduce monthly mortgage payments through loan modification and refinance.