Lower Payments

• One of the most common reasons to modify a mortgage is to lower your monthly payment. This option is most common among individuals who can no longer afford current payments for any number of reasons, such as income reduction or unforeseen medical expenses. If you cannot afford your payments, reach out to your lender about modifying the loan. By extending the length of your loan, you can reduce the amount you owe each month and make your loan more affordable.
  
  

Lower Interest

• A second reason you may consider modification is to reduce the overall cost of your loan through a lower interest rate. There are two common ways to achieve this goal. First, if interest rates have dropped since you took your loan, you could benefit from refinancing at a lower rate. By negotiating with your lender for a modification, you can argue this point and reduce your cost. A second method to reduce your interest is to modify to a shorter loan cycle because of increased income, raising your monthly payments but making your total cost lower.
  
  

Cash Out

• For individuals who have built up equity in a home, a cash-out modification can increase liquidity. This option is popular among senior citizens who have paid off a mortgage but are on a fixed income. By taking equity out of the house, they can secure income for immediate needs. This type of modification is often referred to as a reverse mortgage, and it is risky, as you can lose your home for failure to repay the sum. However, even the Federal Housing Administration now offers reverse mortgage options, showing that they can be effective.
  
  

Consolidate

• If you have multiple loans, such as home-equity loans or a reverse mortgage in addition to your primary home loan, you can modify your primary mortgage to consolidate your debts. This option is common for individuals who are looking to streamline their payments, capitalize on lower interest rates or reduce their total debt. By consolidating, you can start paying your debts off in a more direct manner. However, consolidation often can end up costing you more money, particularly if you consolidate low-rate loans into a higher-rate loan.