Mortgage Loan Modification Calculator: New Payment and Lifetime Interest

Every modification offer is built from some combination of four moves. It helps to separate them, because they do very different things to the total cost.

1. Capitalizing the arrears. Missed payments do not disappear. The CFPB's foreclosure-avoidance guide says that in a modification all or some of your missed payments are added to the amount you owe. That makes the balance bigger, so on its own this step raises the payment. In our example, re-amortizing $310,000 over the same 25 years at the same 7.40% gives $2,270.75 a month, $73.25 more than before.
2. Extending the term. Spreading the balance over more months lowers each payment and adds months of interest. This is the main lever in both the Fannie Mae and FHA procedures described below, which allow terms of up to 480 months.
3. Lowering the rate. The lever that cuts payment and lifetime interest together, and the one both procedures below restrict: Fannie Mae's keeps a fixed-rate loan at its contractual rate unless specific conditions are met, and FHA caps the modified rate relative to a weekly market survey.
4. Forbearing principal. Part of the balance is set aside, stops accruing interest, and is not part of the monthly payment. It is not forgiven. Under Fannie Mae's rules the forborne amount is due at the earliest of maturity, sale or transfer of the home, refinance, or payoff of the interest-bearing balance. Functionally it is a balloon payment, the same structure explained on our balloon mortgage amortization calculator.

A fifth outcome, principal reduction (forgiveness), is named in the CFPB definition, but neither of the two servicing procedures examined on this page lists it among its steps. If an offer includes it, the letter will say so explicitly.

Term extension is where most modified payments come from, and where most of the long-run cost hides. Holding the rate at 7.40% and the capitalized balance at $310,000, here is what each extension buys:

Inputs: $300,000 at 7.40% with 300 months left; $10,000 of arrears capitalized for the modified rows; rate unchanged. Computed with this site's amortization formula on 2026-10-19.

At a 7.40% rate the payment barely moves: going from 25 to 40 years saves $180.35 a month, because at that rate most of each early payment is interest anyway and lengthening the schedule shrinks only the principal portion. The reason is the shape of the amortization curve, covered step by step in how mortgage amortization is calculated. That $180.35 a month costs $298,982 in extra interest compared with today's schedule, almost the size of the original balance. A 40-year extension on its own is a cash-flow tool, not a savings tool.

Rate reductions are worth far more per step than term extensions, and they combine with an extension in a way that matters for the payment targets discussed in the next two sections. Same $310,000 capitalized balance, compared with today's $2,197.50:

Inputs: $310,000 balance (including $10,000 capitalized arrears), fixed rate as shown, 300 or 480 months; "change" compares with the current $2,197.50 payment. Computed with this site's amortization formula on 2026-10-19.

Read across any row and the trade-off is plain. At 6.40%, keeping 25 years trims the payment 5.6% and leaves total interest below today's schedule ($312,144 against $359,249). Adding the 40-year stretch to the same rate takes the cut to 18.4% but pushes interest to $550,581. A 1.5-point cut held at 25 years (5.90%) lowers the payment more than the 40-year extension at 7.40% does, 10.0% against 8.2%, and costs $374,703 less in interest. If a servicer offers a choice of structures, ask for both in writing.

For loans Fannie Mae owns or guarantees, servicers follow a fixed sequence published in the Servicing Guide. Eligibility is set out in section D2-3.2-06: the loan must be a conventional first lien, at least 60 days delinquent or in imminent default under the guide's definition, originated at least 12 months before the evaluation, and not previously modified three or more times. The modified loan must be fixed-rate, and late charges assessed during the trial period must be waived when the borrower converts to the permanent modification. The trial period plan lasts four months if the loan is current or less than 31 days delinquent at evaluation, and three months if it is 31 or more days delinquent. Escrow shortages found at modification must not be capitalized.

The terms themselves come from procedure F-1-27. The servicer applies the steps in order until it reaches a 20% principal-and-interest payment reduction target (just over 20%; the guide's example is 20.01%) or runs out of steps:

1. Capitalize eligible arrears: accrued interest, escrow and servicing advances paid to third parties, and any non-interest-bearing balance from an earlier modification or payment deferral. Late charges may not be capitalized.
2. Set a fixed rate. For a loan that is already fixed, that is the contractual rate in effect.
3. Only if the post-modification mark-to-market loan-to-value ratio is 50% or more and the rate exceeds the Fannie Mae Modification Interest Rate, cut the rate in 0.125% steps down to that rate. Fannie Mae publishes that rate separately; we do not assume a value for it here.
4. Extend the term month by month, up to 480 months from the modification's effective date.
5. If the post-modification loan-to-value ratio is above 50%, forbear principal: the smallest of the amount that reaches the 20% target, the amount that brings the interest-bearing loan-to-value ratio to 50%, or 30% of the post-modification balance. No interest accrues on the forborne amount.

Run on our example. Assume the home is worth $400,000, so the $310,000 post-modification balance is 77.5% of value, and assume step 3 does not apply. The 20% target means a payment of no more than $1,758.00. Step 4 alone, at 480 months, gets to $2,017.15, an 8.2% cut, so the servicer moves on to step 5. Setting aside $39,900 of principal leaves $270,100 interest-bearing over 480 months at 7.40%: $1,757.52 a month, a 20.02% reduction. The forbearance caps do not bind here (30% of the balance would be $93,000). The cost: $573,510 of interest over 40 years, plus the $39,900 still due at sale, refinance or maturity.

FHA-insured loans follow a different rulebook. HUD's Mortgagee Letter 2025-12, whose permanent loss-mitigation provisions took effect October 1, 2025, rewrites the relevant part of Handbook 4000.1. The rules that matter for the arithmetic:

• Fixed rate, capped by market. The modified loan must be fixed-rate. Where the rate is raised, it may be no more than the "Market Rate": Freddie Mac's weekly PMMS 30-year average, rounded to the nearest one-eighth of a point, plus 25 basis points for a 30-year modification or 50 basis points for a 40-year modification, as of the date the trial payment plan is offered. The servicer may set a lower rate at its discretion.
• 360 or 480 months. The total unpaid amount is re-amortized over 360 or 480 months.
• A 25% target. The servicer tests whether a 30-year, then a 40-year, standalone modification reaches at least a 25% reduction in principal and interest. If neither does and at least $1,000 of partial claim funds is available, it reviews a combination modification and partial claim. The 40-year combination is offered with the largest reduction it can reach, up to 25% and not less than 15%; below that, the borrower is reviewed for HUD's Payment Supplement.
• Frequency. Borrowers are generally limited to one permanent home-retention option every 24 months, and must complete a trial payment plan and an affordability attestation.

Applied to this week's survey. Freddie Mac's PMMS put the 30-year average at 7.40% for the week of October 15, 2026 (read October 2026), which rounds to 7.375%. That makes the ceilings 7.625% for a 30-year modification and 7.875% for a 40-year one. Our example loan at those ceilings: $2,194.16 over 360 months (a 0.2% cut) and $2,126.44 over 480 months (3.2%). Neither reaches 25%, so under the waterfall this loan moves on to the combination modification and partial claim review, provided at least $1,000 of partial claim funds is available.

The calculator on this page was built to compare a refinance with an existing loan, but the same math applies to a modification: the left panel is the loan before the change, and the right panel is the loan after it. To use it as a free mortgage loan modification calculator:

1. Your Current Loan. Enter the interest-bearing balance from your latest statement (before arrears), your current rate, and the years left to maturity.
2. New Rate. Enter the modified rate from the offer. If the offer keeps your rate, enter the same number on both sides.
3. Closing Costs, used for arrears. Type the capitalized arrears figure into this box and leave "Add closing costs to the new loan" checked. The tool then amortizes balance plus arrears, which is exactly what capitalization does.
4. New Term. Pick the term closest to the offer.

With our example ($300,000 at 7.40% for 25 years; new rate 6.40%; term 30 years; $10,000 in the costs box) it shows a new payment of $1,939.07, $258.43 a month lower, and its summary line (worded for a refinance) reports that the new loan costs $38,816 more in total payments. Use the amortization table underneath to see how slowly the bigger balance comes down.

Four limits to keep in mind, because the tool will not warn you about them:

• Terms stop at 30 years. The New Term menu offers 10 to 30 years, so a 40-year modification cannot be entered. Use the 480-month columns in the tables above, or the formula on our Excel amortization page with n = 480.
• No principal forbearance. To approximate it, enter only the interest-bearing balance as the loan and remember the forborne amount is still owed as a lump sum.
• Ignore the break-even figure. It treats the arrears as a fee being paid back, which they are not.
• The lifetime comparison is tilted against the modification. The "current loan" side does not include the arrears you already owe, so the comparison understates the old path's cost by that amount ($10,000 here).

For a modification that keeps your rate and term, our refinance amortization calculator and the month-by-month 30-year mortgage amortization schedule show the same mechanics from other angles.

The CFPB's guidance on what to do if you can't pay your mortgage is to call the servicer right away, be ready to explain why you can't pay, whether the problem is temporary or permanent, and your income, expenses and assets, and to fill out the servicer's mortgage assistance application (read October 2026). It also lists refinancing among the options, and its foreclosure guide notes that refinancing is the route to consider when you haven't missed recent payments, while a modification is for when you can no longer afford the regular payment.

Federal servicing rules in Regulation X, 12 CFR 1024.41 set the clock once you apply. If the application arrives 45 days or more before a foreclosure sale, the servicer must tell you in writing within 5 business days whether it is complete. If a complete application arrives more than 37 days before a sale, the servicer must evaluate you for all available loss mitigation options within 30 days and send a written decision, including, where applicable, your right to appeal the denial of a loan modification. Keep copies of everything you send and the date it was received.

Two warnings from the same CFPB page: you do not have to pay anyone for help avoiding foreclosure, and a company that charges upfront, guarantees a modification, or tells you to stop paying your mortgage is showing scam warning signs. A HUD-approved housing counselor can review an offer at little or no cost; the CFPB's counselor search lists them by location.

Every payment and interest figure on this page was computed with the standard formula M = P·r(1+r)ⁿ/((1+r)ⁿ − 1) and a month-by-month schedule from the stated inputs. For the general tool with extra payments and a downloadable schedule, see the mortgage amortization calculator homepage.