How to Get Banks to Lower Your Balance on Your Mortgage

Banks are sometimes willing to lower the balance on your mortgage if you are in danger of entering foreclosure. A bank loses less money by keeping a mortgage active and losing some of the principal compared to gaining a house through foreclosure that requires substantial effort and expense to sell, covering only a fraction of its loss on the original mortgage. Use this knowledge to your advantage when negotiating your way to mortgage relief.

Instructions

1

Contact your lender before you start becoming late on payments. Request that the bank lower your required payments temporarily or permanently so you can remain current on your mortgage.

Alternatively, ask the lender to reduce the balance on your mortgage, which has a similar effect.

Negotiate an agreement even if you are not in danger of losing your home. If your home has greatly reduced in value or if your lender has had to work through many foreclosures in your area recently, the lender may be more willing to reduce your mortgage balance to keep your business.

2

Remain in touch with your lender if you become one to two months late on your payments. Request a mortgage loan modification. The lender may be unwilling to alter your mortgage if you have sufficient income to pay the current loan comfortably. Your credit rating will be damaged by allowing your payments to become late, but your chances of successful mortgage modification will improve.

3

Determine your eligibility for loan modification or refinancing with assistance from the federal Making Home Affordable program. Only homeowners with mortgage principals up to $729,750 and monthly payments including taxes, homeowner's association fees and insurance above 31 percent of their gross income are eligible for assistance under the program. Lenders participating in the program receive subsidies for successful loan modifications and refinances. Visit the government website of the program to test for your eligibility. Call the hotline phone number for further assistance.

4

Apply for a forbearance agreement from foreclosure if you are in danger of becoming 90 days late on your mortgage or more. This should not be attempted unless you are unable to meet even reduced mortgage payments and are in real danger of losing your house. Describe your financial situation in your letter and indicate why you will likely be able to become current again on your mortgage.