– The Stop Foreclosure Institute recently received a question from Luis. Here is Luis's Question.
"I am working on a loan modification on my home. I just don’t want to be upside down and want a fair interest rate. Why should I pay on a mortgage that is twice as much as my home is worth, plus the interest on that mortgage? It just doesn’t make sense.
How can I get a loan mod with a fair interest rate where I am repaying what my home is worth today? Thank for your help, Luis.”
Here was our answer. You are asking for something that most lenders don’t like to do. Lenders don’t like principal reductions. Here is why.
Principal reductions usually have to be written down right away on their financial books. If you owe them $300,000 and they reduce your loan principal to $150,000, then they immediately have to reduce the company’s earnings by $150,000 for the year.
If they do that on enough loans, then it hurts the CEO’s ability to get a bonus. He may even risk losing his job. I don’t offer much sympathy to CEOs, but that’s how it works.
Here is what lenders like to do instead. They will reduce your interest rate to 2% for 5 years. After that, the interest rate will go back to the original level.
That way the write off will be much smaller than $150,000. It might be a $30,000 write off. That makes a much smaller difference on the CEO’s bonus for the year.
It’s also one of the reasons that most loan mod programs don’t work. The banks aren’t willing to be realistic.
It’s also why I think a short sale is the best principal reduction plan. You get to erase the bad debt. Rent a home for 2-3 years and then buy a new one at today’s market level.
That way you guarantee your principal reduction and don’t waste time arguing for a principal reduction with someone who isn’t allowed to give it to you. Thinking about a short sale?
I can help you short sale your property and never pay the bank another penny. Send me an e-mail at email@example.com. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail. If you prefer, then you can call me at 253-310-1177.
Discover how other sellers successfully completed a short sale and request a free consultation by clicking here.
Thinking about a loan modification? Our Loan Modification Kit has the instructions you will need to get a loan modification approved with your lender. Click here to request a copy.
Thanks for reading this, Nathan Olotoa.
Nathan is a Real Estate Broker at Keller Williams-Tacoma. Short Sales Realtor
Phone: 253-310-1177. firstname.lastname@example.org.
Listed to Sold in 59 days or less
View Tacoma and Seattle homes for sale at 59days2sold.com. View my previous blog posts at www.seattleshortsalesagent.com.
Short Sale Realtor. Short Sales. Realtor. Tacoma Homes for Sale. Seattle Homes for Sale, Seattle Short Sales. Tacoma Short Sales. Loan Modifications. Tacoma Short Sale Agent. Seattle Short Sale Agent.
Copyright 2010 SFI Marketing Institute, LLC. All Rights Reserved. This is not intended as legal, technical, or tax advice. Please speak with a licensed professional before making any decision. Information is deemed reliable but not guaranteed as of the date of writing. The views expressed here are Nathan Olotoa's personal views and do not reflect the views of Keller Williams-Tacoma.
This information on Short Sales: Why Should I Pay Double For My Home is provided as a courtesy to our viewers to help them make informed decisions.