Will A Mortgage Loan Modification Lower My Interest Rate?

It is possible that your interest rate will be lower. In fact, the Treasury Department is providing incentives to your lender to write the interest down to as low as two percent, if that is what is necessary to get to a payment that you can afford. However, the idea is not to get you the lowest possible rate. Each borrower's interest rate will only be reduced to a point sufficient to get the modified payment to equal 31 percent of your gross monthly income.  Not all borrowers will need a rate reduction to two percent in order to achieve a monthly mortgage payment that is affordable, so yours could be higher. Contact a loan modification attorney to find out what the current situation will do to effect your home loan.

You Have Five Years Under New Interest Rate

Under the terms of a loan modification with the federal government’s Home Affordable Modification Program (HAMP), if the modified rate is below the market rate as determined from the Freddie Mac Primary Mortgage Market Survey rate on the date that the modification agreement is prepared, your modified rate will be fixed for a minimum of five years.

Beginning in year six, your rate could increase, but not more than one percentage point per year until it reaches the market rate at the time the modification agreement is prepared by a real estate attorney.

Your rate can never be higher than the market rate. This is stated in the modification agreement that you sign upon finishing the loan modification application process. If the modified rate is at or above the market rate at the time the modification agreement is prepared, however, the modified rate is fixed for the life of the loan.