How to Renegotiate Mortgage Terms

Renegotiating your mortgage helps keep you from falling behind on payments.

Renegotiating your mortgage helps keep you from falling behind on payments.

Keeping up with mortgage payments can be tough, especially if you have other loans or credit cards that you're trying to repay as well. If you're barely making ends meet, then it might be time to try to renegotiate your mortgage terms. Many mortgage lenders would rather renegotiate your loan than have you default or file bankruptcy, so there's a good chance your lender will be open to renegotiation if you can prove that you're struggling financially.

Gather your monthly bills, pay stubs, recent bank account statements and any other documentation that shows how much money you have coming in and going out each month. Mortgage renegotiation is generally done when you're in danger of falling behind on your payments, so you need to be able to show documentation of a financial need.

Contact your bank or mortgage broker, and explain that you're having a hard time making ends meet. Ask to speak to a loan officer, and give him as much information about your situation as you can; if you're falling behind because you've been laid off, have gotten hurt or have had an increase in your monthly expenses, then let him know. Tell him that you'd like to modify your mortgage to reduce your payments.

Ask the loan officer if her bank or brokerage is part of a federal loan modification program. These programs exist to offer lenders incentives to renegotiate loan terms for those who are struggling. If your mortgage holder participates in one of these programs, it will make your renegotiation easier.

Provide your bank with the documentation of your financial problems. The loan officer will review your income and expenses to determine whether you are actually experiencing financial hardship or if you're just having problems managing your money. You may be required to provide a written statement about your financial problems as well.

Discuss your options with the loan officer. If you qualify for renegotiation, he will recalculate what is owed on your mortgage and present you with an alternative payment schedule. Once you review the alternative payments and sign the new mortgage papers, your monthly payment will change to the renegotiated amount.

Tip

  • If you don't qualify for renegotiation and have made your payments on time, you might be able to refinance your mortgage instead. Refinancing allows you to take out a new mortgage loan that pays off what's left of the original, reducing your monthly payments because the loan is for a smaller amount than your original mortgage loan was.

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