What is the difference between loan modification and refinancing?
Both could reduce your mortgage payments. To get a refinance, you have to go through the same steps you did to obtain your first mortgage, including shopping for a lender, getting your home appraised, going through a credit check and paying a percentage of the principal as points to originate it. In a non-conforming loan, most lenders won’t accept a refinance if your loan to value is greater than 80 percent such as owing $850,000 on a $1 million co-op in New York City. However, you do have the maximum flexibility to shop for the best rate available. Loan modifications go through your lender’s loss mitigation department. You must supply proof of income, outline your expenses and write a hardship letter. A lender will not modify a mortgage unless you can show that a change in its terms will enable you to repay it in a timely manner. If you have a second mortgage, it has to be modified separately.
