Reduce Mortgage Principal From Your Home Loan To Reduce Some Burden

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According to a recent survey report, it has been proved that 38% of homeowners in Michigan have second mortgages (including home equity loans) and are “underwater”, or owe more than what their homes are worth of. This is just because in this troubled economy, home values have suffered a lot. Most of the homeowners, between their first and second mortgages, owe more money on their homes than the current value, or have “negative equity.” So, for their relief, there is a great service available for the debt burdened.

If this is the case with you as well, and you have a second mortgage or home equity loan, you should explore different options of removing that second mortgage or home equity loan. You can also hire an attorney to discuss your options to remove a secondary mortgage, reduce your total mortgage balance or re-balance your home’s value relative to current market conditions. In addition, this may help you to reduce mortgage principal.

The best way to legally remove a second mortgage or home equity loan is to opt for Chapter 13 Reorganization Program. Under this program, if your home is only worth what you owe on your first mortgage, the second mortgage will be no longer considered as a “secured” obligation and can be easily removed. Through Chapter 13 program, the second mortgage, home equity loan or other lien is converted to an unsecured debt. This process is also known as “Lien Stripping ” and has many benefits, which are mentioned below:

  • Under the terms of the Chapter 13 reorganization a portion, if not the majority, of your unsecured debts will be eliminated, including the stripped lien. You just need to pay your “best efforts” over the course of the program (3 -5 years).
  • This will create a lower payment going towards your monthly mortgage obligations.
  • Any money paid toward the “stripped lien” would be paid at 0% interest and oftentimes paid at pennies on the dollar; along with any other unsecured debts you may have (i.e. credit cards, medical bills, personal loans, etc.)
  • If you are behind on your primary mortgage or a vehicle, and they are being paid through the Chapter 13 Reorganization, all payments to your unsecured creditors (including the stripped lien) are deferred until you are caught up on the mortgage or vehicle.

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