How Does a Mortgage Extension Work?

If you can't afford your mortgage, an extension can help.

If you can't afford your mortgage, an extension can help.

A mortgage extension is a method used by homeowners who are struggling financially to keep their homes. The extension helps by reducing the monthly payment amount, providing immediate relief for those who are out of work or having other income struggles. The money that would have been due each month under the old terms is still due eventually, but the length of time given to the homeowner to pay it back is extended.


When a homeowner can no longer afford the mortgage payments on her home and has fallen behind, a mortgage extension can help her keep her home. The extension is a way of reducing the payments by increasing the term of the loan. In the long run, it ends up costing the homeowner more, due to additional months or years of interest payments, but the immediate problem of high monthly payments is resolved. For many people, a mortgage extension is desirable because it may be the only way to get out from under late fees, bring the loan current, and keep their homes.


Qualifications vary among lenders, but in general you can expect certain criteria. You are eligible for a loan modification only if you are at least 90 days behind on your payments, and you must be able to demonstrate that you didn’t fall behind deliberately so that you could qualify for a modification. The property has to be your primary residence, and you must be able to prove some type of change in circumstances, such as losing your job or incurring significant medical bills. In most cases, you won't be considered for any loan modification if you have filed for bankruptcy, and lenders will generally only work with people who they feel are responsive to the lender.

Federal Programs

The federal Making Home Affordable (MHA) program is available to those homeowners who qualify, and may be a solution for those who can't get a mortgage extension. The MHA program provides a variety of options intended to help those who are out of work, whose homes have lost value or who are struggling to pay the mortgages for other reasons. The terms for these programs are often very attractive, resulting in lower payments through decreased interest rates or a reduction in the principal amount due. As a part of this effort, the Home Affordable Modification Program (HAMP) provides guidelines under which lenders will reduce the monthly payments to 31 percent of the homeowner’s monthly gross income. Check with your lender to see if you qualify for any of the current federal loan modification programs and determine if this is the best solution for you.


For some homeowners, refinancing may be a realistic alternative to a mortgage extension as a way to reduce the monthly payment, but this works only if the home has not lost value. The main difference between refinancing and loan modification is that a homeowner who refinances typically is expected to be current on all bills, including the mortgage, and to have acceptable credit. Refinancing is not necessarily a response to a hardship situation, whereas a mortgage extension is. If you refinance, it may or may not extend the length of your mortgage, depending on the terms of your new loan.


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