Principal Reductions in Your Primary Mortgage Loan

by admin on February 26, 2009

So far there have been very few examples of people getting principal reductions in their mortgage loans. If you are seeking a loan modification, your best bet is to try and get #1 an interest rate deduction and #2 an extension on the number of years on the loan. It’s possible to get a principal forbearance, but that only serves to backload your principle payments – in the end you will pay back the entire balance, it will help out your monthly payments in the short term though.

Since there are very few people getting principal deductions in their mortgage during a loan modification, it’s important to explore the other ways to save. When you enter into discussions with your lender, be realistic if you are looking to get a reduced monthly payment. Go for an interest rate deduction – you can often get a break on the interest rate for the first 2-6 years and then it may escalate up to a rate close to what you were paying before. One of the easiest ways to get a break on your monthly payments is to extend the duration of the loan. If you extend a loan from 30-40 years, you could see close to a 20% drop in your monthly payments depending on how your loan is structured.

Each loan modification is different, but don’t go into the process expecting you’ll get your loan principal cut in half, that just isn’t happening. Be realistic and you might get a break from your lender.

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