While both are very popular options right now, mortgage modification and refinancing are different things. While many aspects may seem similar, the rest is not. In recent months many homeowners have been looking for a way to get an affordable mortgage. Many do not know whether mortgage refinancing or modification is the answer. Here is the difference.

Homeowners wishing to modify their home loan, are doing just that. They are taking their existing home loan, and changing it. Whether the change is in interest rate, length, or another term or condition, the loan is the same. Often, mortgage modification is harder to get than refinancing, and is approved mainly for homeowners facing financial problems. These problems should be written down in a simple letter, along with your plan to get your finances in order. Also, make sure to truly show that mortgage modification is the only to save your home, and how much losing it would mean to you. Include this letter with your home loan modification application, and hope for the best. Many times having this letter of financial hardship will improve your odds of getting approved for mortgage modification.

Mortgage refinancing is completely different. Mortgage refinancing is taking one loan, and replacing it with the old one. Ideally, this new home loan serves the purpose of saving money through reduced interest rates, or offers other benefits. Cash out refinancing is one of the benefits. Homeowners can tap into the equity they have built in their home and borrow against it. This money can be used for anything a homeowner wants. Also, mortgage refinancing can get a homeowner out of an ARM loan and into a stable, fixed rate mortgage. There are many benefits to refinancing, but it is not the option for everyone.

-M Petrone

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