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A loan modification is when your lender agrees to change the terms of your initial loan. A modification doesn't pay off your balance like a refinance does but instead gives you some options to change your loan's conditions.


It is important to note that a loan modification can negatively impact your credit, so applying for a refinance might be a better option if you’re current on your payments.


To secure a loan modification, you must apply with your current lender. Some modifications your lender might approve you for include:


  • Loan term changes: If you’re struggling to pay your mortgage, your lender may be able to extend the terms of your loan, giving you more years to pay on your balance and reduce your payments.
  • Interest rate reduction: If interest rates are currently lower than your original terms, modification can help you take advantage of lower rates and lower payments.
  • Loan structure changes: If you are currently paying on an adjustable-rate mortgage, your lender might approve you for a fixed-rate modification, making payments predictable.
  • Principal forbearance: Your lender might agree to suspect part of your principal until later, temporarily lowering your payments.


There is no guarantee that your lender will offer you a loan modification. Often, securing a refinance is easier than a loan modification.