Is your home worth half of what you owe?

Boynton Beach FL – We 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...principal reductions. Here is why.

Principal reductions usually have to be written down right away on their 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. I don’t have much sympathy for the bank 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. 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. Then you 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.

We can help you short sale your property and possibly never pay the bank another penny. Send me an e-mail at ShortSaleInfo@thejacksonteam.com. I will contact you for a free consultation.When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (561) 602-1258

Thinking about a loan modification? Our Boynton Beach loan modification kit has the instructions you will need to help you get a loan modification approved with your bank. LoanModKit@thejacksonteam.com.

The Jackson Realty Group, Personalized...Not Franchised

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 Steve and Jackie Jackson's personal views and do not reflect the views of The Jackson Realty Group Inc..