An Interest Rate May Change Over Time In A Loan Modification
A loan modification will be able to get a person's interest rate on a mortgage loan to change
. This is done in that it will be lowered. This is used to make sure that the value of one's monthly mortgage payment will be 31% of the value of one's gross monthly income. However, the interest rate may not stick for the entire period of time that the loan is being held for. There are some cases where the interest rate may end up changing over time.
The interest rate may go down to as low as two percent in value. This is a value that is substantially lower than what would be dealt with through the current market rate. This is beneficial for those who have either gotten fixed rate loans that are higher in rate than the current market rate or for those who cannot afford their rates any longer. However, the rate may end up changing as a means of getting it closer to the actual market rate.
The new interest rate that will be used will be set in stone for the first five years of the
loan modification. A major reason for this comes from how the interest rate will work to make it so a person can actually pay off the first payments on a loan. This can also work to make it easier for a person to possibly get out of the financial hardship that caused that person to enter the loan modification in the first place.
The change in one's interest rate will end up beginning after the sixth year of the loan modification. The rate will end up increasing in value on a gradual basis. The rate will continue to go up at an annual rate at a fixed level. This is done as a means of making it so any increases in the monthly debts owed on a loan will not be too strong in value.
Meanwhile, the increases in the interest rate each year will have a cap set on it. The increase in this rate cannot go up by more than one percentage point in value. Information on the specific rate increases that one would be dealing with should be listed within the terms of one's loan modification agreement.
The increases will continue until the market rate on the loan is reached. The market rate will usually be determined at some point in time during the course of the loan modification. Sometimes the target rate will be what it was after the fifth year of a loan modification or it will be the same as what was used when the loan modification was first created. No matter what is used the information on what the target rate will be should be listed on the terms of one's loan modification.
Once the final rate is reached it will be the rate that will work for the rest of the life of the loan. This rate will not change after it gets there.
by: 1stforeclosureprevention
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