Principle Reduction

The benefits of the principle reduction program

A principle reduction program helps property owners get back on their feet by turning an upside down loan back into a reasonable mortgage based on the current value of the property.

Getting a principle loan reduction can make all the difference to the average property owner. For example, if a home is originally appraised at $220,000 and carries a mortgage of $200,000, there is $20,000 worth of equity in the home.

However, if property values drop and the home suddenly is worth only $160,000, the balance is upset; now the buyer owes $40,000 (25%) more than the home is worth! This is commonly referred to as an upside down loan. Loan modification is a process by which buyers can adjust their payments if they become unable to cover their bills. A special facet of loan modification is known as principle reduction, which brings the mortgage on the home in line with its current, lower worth.

In the above example, a new appraisal of the home could be done showing it was indeed worth $160,000, and a new mortgage would be implemented for $144,000. This leaves 10% equity of $16,000 in the home - almost what the buyer started with before the drop in value. This can make a huge difference in the owner's debt to income ratio, or DTI - impacting credit and solvency, among other things.

• Only 90% of the new appraised value, leaving you an instant 10% equity
• A fixed rate of interest, a 30 year term and only a 3 year prepay
• Full doc loans with 50% DTI (with new payment on new value)
• Debt settlement contracts accepted if DTI over 50%
• No limit on the loan amount
• Only 60-90 days for funding (funded by hedge fund)

Many people don't realize they qualify for a principle reduction. However, lenders don't want to foreclose on properties if they can make arrangements that will benefit them more. In many cases, a loan modification will cost the lender less than going through the foreclosure procedure. Principle reduction is one of the easiest ways to put the buyer back on track, and benefits the lender through the resumption of regular payments.

• Low FICO scores, late payment history
• Rentals (75% of rental income is considered)
• Current or late on mortgage payments
• Formerly denied for loan modification, or unhappy with a modification

The main requirements for participation in the program have to do with the finances of the property owner and the top-heaviness of the loan.

• 12 months of bank statements to prove income
• 25% upside down loan

If the property owner is already facing foreclosure, loan modification is still an option. Also, even if the property owner is current on their loan but knows that they soon will not be able to make regular payments, principle reduction can still be explored.

Information about commercial loan modification

Mortgage loan modification from principle reduction