By Kevin T. Lonergan, Legal Assistance Attorney, Rock Island Arsenal; editing support provided by Jon Cook, Army Community Service, Rock Island ArsenalOctober 9, 2013
ROCK ISLAND ARSENAL, Ill. (Oct. 9, 2013) -- Mortgage companies and their relationships with the financial community have made lots of news recently. However, we have seen a new wrinkle in "mortgage modification" offers from companies that are offering Soldiers who are up to date in their mortgage payments. Some Soldiers who have never even missed a payment are now offered a mortgage "modification special offer" to reduce their monthly payments.
So, what's the catch?
A recent Soldier client had me look over such a modification special offer. In the offer that I reviewed for her, the monthly payments were going to be reduced by about $400 a month; so far, so good. However, the Soldier did not realize that the modification special offer then stretched her payments out for ten more years. When I asked if she would like to make house payments until she was approximately 85 years old, I got a triple take. "No, no, no" was the answer I got.
Reading through all the boilerplate legalese can at times be important, but the most important factors in a mortgage are the principal amounts, annual percentage rates and time. Even with my very limited math skills, this client would have paid something like $150,000 more in interest if she took this modification special offer.
After a few more questions I found out the client was going to be deployed and I urged her to put at least some of her increased pay differential while deployed towards the mortgage principal. The client agreed that this was a great idea to pay additional principal on the home mortgage while they were deployed. Other "painless" options are to pay extra each month towards the principal, or an extra payment each year, especially early in the term of the mortgage.
If you have questions on any mortgage modification or strategy, it is best to seek professional advice from an Army Community Service financial readiness officer at (309) 782-0815 or the Legal Assistance Office at (309) 782-0665.