Loan modification
A lender-approved change to loan terms to lower monthly payments, usually offered to borrowers in hardship. Can include rate reduction, term extension, or moving missed payments to the back of the loan.
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Part 1 of 4
Why a seller cares
A modification changes the loan to make it affordable and is the alternative to selling for a homeowner who wants to stay. A modified loan can carry a balloon or a deferred balance that shows up in the payoff when the home is eventually sold.
Part 2 of 4
A simple example
Your loan was modified in 2021: the rate dropped, the term stretched to 40 years, and $18,000 of missed payments was deferred to the end. Selling now, the $18,000 is in the payoff.
| What the modification did | What it means at sale |
|---|---|
| Lowered the rate and stretched the term | A lower payment; the balance is what it is |
| Deferred missed payments to the end | That amount is due at payoff |
| Reduced the principal | Rare; the payoff is genuinely smaller |
A modification changes the terms, and the deferred parts wait for the sale.
Part 3 of 4
What people get wrong
That a modification wipes the missed payments. Most move them to the end of the loan, and the end of the loan is the day you sell.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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