Principal Reduction

Principal Reduction program is for home-owners who are upside down on their mortgages.

The current economic situation with foreclosures and short sales finds many home-owners in a situation with their home upside down.

As an example, if the home-owner has a loan for $500,000 and the value of the home is $300,000, the home-owner is upside down and has negative equity.

With reduction of principal, the home-owner will have a new loan for 90% of the appraised value of the home or $270,000 in the above example.

Reduction of principal is not limited to primary residences. It can be done for second homes or investment properties.

Qualifications for Principal Reduction

In order to qualify for reduction of principal, the home-owner should have

• Debt/Income(DTI) ratio of less than 50%

where debt is the total debt on their credit report and typically includes credit card debt, car loans, student loans etc. Income is the Gross Income of the home-owner.

If the DTI is more than 50%, the home-owner can sign up for Debt Settlement and get his unsecured debts reduced.
• Credit Score
• If the credit score of the borrower is less than 700, the interest rate on the new loan will be "PRIME+4%", which is 7.25% right now.



• If the credit score of the borrower is more than 700, the interest rate on the new loan is "PRIME+3%", which is 6.25% right now.

With reduction of principal, his payments would be $1663 if his credit score is above 700 and $1842 if his credit score is below 700. In any event, his savings on his monthly payments are over $1000! The home-owner also saves on the total interest paid for the life of the loan.

In order to see if you qualify for a principal reduction program, please out the form for FREE Consultation for Principal Reduction

Custom Search

Return from Principal Reduction to Home