< Back

Mortgage Loan Modification vs. Mortgage Refinancing

two story house

What is the Difference Between a Mortgage Loan Modification versus a Mortgage Refinance?

If you’re a homeowner whose mortgage payments have become more expensive than you’d like them to be, there are a couple of ways of taking those payments down to a more affordable level. The most common options are loan modification or refinancing. Both aim for the same goal – to save you money by lowering your monthly mortgage payments – but these options are very different when it comes to qualifications and financial strategies.

Modifications vs. Refinancing: Mortgage Loan Modifications

 If you’re behind on your mortgage payments because of financial hardship, a mortgage loan modification might be the right option for you. With a modification, homeowners can work with their mortgage lenders to change the terms of the original loan. The lender may be able to lower the interest rate, lengthen the terms of the loan (to lower the payment), or even reduce the principal. To qualify for a modification, the homeowner needs to be behind on their payments or facing foreclosure; the lender will likely ask the homeowner to provide proof of economic hardship.

Modifications vs. Refinancing: Refinancing Your Mortgage

 When a homeowner elects to refinance their mortgage, it means that the homeowner is replacing their current mortgage loan with a new one. This option is beneficial for homeowners who are looking for a mortgage with better interest rates, lower monthly payments, or shorter payment terms. Some homeowners refinance their loan based on the equity they have in their home; some lenders allow “cash-out” refinancing so that the homeowners can use their home equity to cover other expenses. To qualify for a refinance, the homeowner must be current on their mortgage payments and will likely have to show a good credit score and proof of income. Also, because refinancing involves getting a new loan, the homeowner will have to pay closing costs again (which are typically thousands of dollars).

Modifications vs. Refinancing: The Bottom Line

To recap, here are the major differences between Mortgage Loan Modifications and Refinancing:


  • Offered to homeowners facing foreclosure or who will miss payments
  • Homeowners must prove financial hardship
  • Help homeowner get current or mortgage payments
  • Modify the existing loan
  • Does not cost money to modify


  • Homeowners may elect to refinance their mortgage due to interest rates, payment terms, etc.
  • Homeowners must prove good credit and adequate income
  • Homeowner must be current on mortgage payments to qualify for refinancing
  • Replaces the old/original loan with a new one
  • With refinancing, homeowner must pay closing costs on new loan

Have Additional Questions? Contact Burrow & Associates

There are multiple ways that a homeowner can lower their monthly mortgage payments. Loan modification and refinancing are just two of the available options. If you are considering a mortgage loan modification and want to discuss your best options, please reach out to Burrow & Associates at (678) 323-2394. We’ll help you take a proactive approach with your mortgage servicer and work on getting your finances back on track.

  • Request a FREE Consultation

    Fill out the form below to receive a free and confidential initial consultation.