Workout Modification NPV Calculator

Workout modification is lender decision. This calculator compares NPV.

Balance

Modified rate

New term years

Foreclosure NPV

Discount rate %

Modification NPV

$5,113,092

Mod advantage vs foreclosure

-$86,908

Annual cash flow

$478,988

How the math works

Mod payment amortized at modified terms. NPV = PV of cash flows at discount rate. Advantage = mod NPV − foreclosure NPV.

Workout modifications benefit both parties when borrower viability plus collateral trajectory favors holding. Lenders should model modification NPV conservatively — borrowers already in distress have higher re-default rates than performing loans, and the NPV should reflect that probability.

How to Use

Enter current loan balance.
Enter modified rate %.
Enter new term years.
Enter foreclosure NPV.
Enter discount rate %.
Read modification NPV advantage.

Frequently Asked Questions

Modification types?

Rate reduction (lower cash flow, higher lifetime interest). Term extension (lower payment, amortize longer). Principal reduction (rare, heavy concession). Arrears capitalization (add to balance). Each has different NPV profile.

When lender agrees?

Modification NPV > foreclosure NPV. Typically when borrower still viable, collateral value declining, liquidation cost high. If foreclosure wins NPV, lender should foreclose (or sell note at discount).

Key metrics?

DSCR under modified terms. LTV trajectory. Borrower willingness to contribute capital. Market conditions for foreclosure sale. Each factors into modification attractiveness.

When does a lender negotiate vs foreclose?

Lenders calculate their net recovery from foreclosure (asset value minus legal, time, and sale costs) and compare to any workout proposal. If your offer nets the lender more than foreclosure, and you present it with clear sources of capital, most lenders will engage. Bring a credible sponsor, documented sources, and a timeline — vague asks get declined. Build the relationship before distress, not after.