What does the term "loan modification" refer to?

The term "loan modification" specifically refers to a change made to an existing mortgage contract with the intent of making the payments more affordable for the borrower. This usually involves alterations such as lowering the interest rate, extending the loan term, or changing the repayment schedule. Loan modifications are often used as a means to prevent foreclosure and provide financial relief to homeowners who are struggling to meet their current mortgage obligations.

In contrast, while home equity loans involve borrowing against the equity in a property, they don't modify the existing mortgage itself. Similarly, refinancing typically involves replacing the existing mortgage with a new one, often at different terms but isn't classified as a modification. Government grants for homebuyers are entirely separate financial aid products designed to assist individuals in purchasing a home rather than altering the terms of an existing loan.