How to Get a Principal Reduction on Your Mortgage
As you go along with your loan modification application, you will be surprised to discover how the value of your property has diminished to about 15% in just over a year since you had it. This is a painful reality for homeowners especially those who have fall behind on their mortgages and are at risk of foreclosure.
Although negotiations for principal reduction rarely close on a positive note, you can still try to talk with your lender to present your proposal of a reduction. Some lenders do actually consider reducing the principal amount loaned. Who knows yours might just be one of them?
Tips on How to Get a Principal Reduction on your Mortgage:
- Hire a realtor to conduct a comparable analysis on the housing market in your area based on some very low sales. Show it to your lender and convince him or her of how they are keeping depreciated assets. Also, list all the problems your property has.
- Request an appraisal on your property. Be forewarned though that this procedure will take a long time. Be persistent and tell them that you will personally assist their appraiser. In this manner, you’ll know when the appraisal is going to be conducted and you will be able to pinpoint each problem that your property has.
- When it is done, the waiting will resume especially if a Servicer is handling your case. You will have to wait for the approval of the investor.
- Generally, a trial period will take effect before the actual modification and a Forbearance Agreement will be sent to you. Read carefully and find the word that says “THE LOAN WILL BE MODIFIED” on the terms. Again, be persistent and strong with your convictions. If it says “the loan will be considered for modification” at the bottom of the term, question them how it can be so.
- When the trial period is over, the modification must take effect.
Following these guidelines does not guarantee a huge amount of reduction in your principal loan. So manage your expectations.
Reducing Your Mortgage Interest Rate
Lenders generally would much rather reduce the interest rate on your mortgage than reduce the principal loan amount. They have greater to lose on principal reduction as it affects the capital. With lowering the interest rate, profit is lessened.
Expect your lender to offer this solution to you. Base on your financials, they will derive the proportional figure that you qualify. What you must do is to get a low interest rate to make the payment affordable and propose it to your lender.
