Schedule Your Free Consultation
Couple concerned about bills

What’s the Difference Between a Loan Modification vs. Refinance?

Loan Modification vs. Refinance

After taking advantage of the COVID-19 mortgage forbearance or trying to stay ahead after the pandemic in general, homeowners may be struggling to make current mortgage payments. There is hope for homeowners, though, that avoids foreclosure.

If you need help getting back on track with your mortgage contact the team at Licata Bankruptcy Firm today. We will work with you for the best outcome possible which can include you staying in your home.

Loan Modification

A loan modification is one option for homeowners looking to stay in their homes but may not be able to make their monthly mortgage payments. A loan modification is a change to the terms of your current mortgage. A loan modification can only be through a homeowner’s existing lender and not all lenders may accept it — lenders review each situation and can choose not to go forward with it. Usually, a borrower needs to show severe hardship that is making them unable to make the payment.

If a lender approves a loan modification, however, the adjustments could include:

  • Long-term changes: this is when a lender extends the term of a loan. This would allow a borrower to make smaller payments over a longer period of time.
  • Interest rate reduction: if interest rates are lower than what the homeowner originally paid for, then they could ask their lender to reduce their interest rate, which could lower their monthly payment.
  • Principal forbearance: this is when the lender would set some of the principal aside and the homeowner could pay that back later (these modifications are rare).
  • Loan structure change: asking your lender to adjust your interest rate to a fixed rate. This is especially helpful for families who live on a fixed income.


More common than a loan modification is refinancing. During a refinance, a homeowner can change the terms of your loan and even use equity to take cash out of your home if you so choose. Unlike a loan modification, refinancing can be done with any lender — it doesn’t have to be with the homeowner’s current lender. Homeowners should keep in mind that as with an original loan agreement, there are usually closing costs and other costs associated with refinancing, but the overall goal is to lower monthly mortgage payments.

When you’re looking to better your financial future contact Licata Bankruptcy Firm. Our bankruptcy lawyers help homeowners look at all their options to find the best solution. Schedule your free consultation today — (417) 213-5006.

If you require further information regarding loan modification vs. refinancing, please schedule your free consultation today by calling (417) 213-5006.