How to Lower a Mortgage Principal

The principal of your mortgage is the amount you still owe, excepting interest. Lowering your principal is a good way to either lower your current payments or reduce the life of your loan. Once the principal balance on your mortgage is lowered, youll owe less interest and have less debt on your credit report, which will make you more desirable for things like auto loans. Lowering a principal balance on a mortgage can be achieved in several ways, but must always be approved by your lender.

Instructions

1

Gather documents that show evidence of declining income or another inability to make your regular mortgage payments.

2

Call your lender and set up a meeting to discuss reducing your total mortgage.

3

Pull up your documents and calculate how much you still owe on your home. Compare this to the cost. You're considered underwater on your mortgage if you currently owe 100 percent or more of the value of your home.

4

Explain to your mortgage banker that you're underwater, if you are. Explain that you've having difficulty making payments. Request a principal reduction to help you meet your obligations without having to go into default on the loan. Cite the Bank of America principal reduction program for homeowners who owe more than 120 percent on the value of their home. This was announced in March of 2010.

5

Agree to sign a form indicating that your mortgage principal will return to what it was before if you miss a mortgage payment.

6

Sign the forms detailing the reduction in your principal and make loan payments faithfully.