We all are hearing about home loan modifications and refinancing as opportunities for those who are struggling financially to stay in their homes. So, what's the difference between the two? Here are the basics, but before you decide, talk to a trusted mortgage broker so you know you're making the right decision.

Refinancing basically means that you pay off your current mortgage with a new mortgage that has better rates, payments and terms. You will have title, escrow and appraiser fees as well as taxes to pay with a refinance. Normally you are required to have equity in your home, a good credit score and proof of income.

Home Loan Modification is the process of changing the terms of a mortgage to a more affordable monthly payment, and a good credit score is not required. Often a lender will choose to modify the loan instead of foreclosing. With a modification, you have to show proof that your current loan creates financial difficulty. For those who have lost their job or have any other financial hardship, modification may be a good solution.

Which option is best? It depends on your situation. Understanding the pros and cons of each will help you decide. Just remember, there are a variety of options to help you stay out of foreclosure.