Real Cost of Home Loan Modification

For most homeowners, the general idea is that home loan modification will save them money and help them get back on their feet. What few of them know, however, is that there are costs associated with loan modification, and that sometimes the savings aren’t really worth the price. More importantly, few realize that not all home loan modification companies will give them their money’s worth.

So what really goes into a loan modification? How much of the price is worth paying if you’re a struggling homeowner? This guide shows you some of the costs you can expect.

Loan modification fees
First of all, there are fees for the loan modification itself—basically a fee for the lender who goes through all the trouble of opening your file and crunching your numbers. This amount is decided on by the bank, and according to recent studies, can range anywhere from $800 to $8,000. Make sure to ask for a breakdown of the costs—more often than not, there are lots of steps you can save on by doing them yourself.

Service fees
A lot of paperwork goes into a home loan modification, and with thousands of borrowers coming in at a time, the costs can quickly add up for the bank. While the services are less expensive than loan modification fees, they usually have to be paid upfront and may not be given back if the loan modification isn’t approved. Service fees can be as low as $400 in some banks and as much as $1,500 in others.

Third-party assistance
Many homeowners choose to work with a home loan modification attorney to negotiate with the bank on their behalf. This speeds up the process and takes a lot of weight off the borrower’s shoulders. However, it also tends to be expensive: companies charge anywhere between $3,000 and $8,000 for a home loan modification. If you think the time and effort it saves is worth the price, then working with a lawyer may be a good choice.

Besides the financial costs, there are also other consequences to consider before deciding to get your loan modified. For example, a home loan modification requires a heavy investment in time—as much as 12 hours of phone calls, filling out paperwork, and gathering financial documents. The effect of the home loan modification on your credit score and taxes should also be taken into account.

At the end of the day, it’s still a case-to-case basis: if you think the amount of time, effort and money you put in is worth saving your home, then a home loan modification is a good choice for you.