All about mortgage principal reduction

1.Mortgage principal reduction is given to people who are unable to pay their mortgage principal. For you to understand the process, you need to know want principal reduction is. Principal reduction is a decrease in the initial amount of a Mortgage loan for the purposes of reducing the balance of the properties that are affected by the negative equity. Okay, negative equity usually results when you purchase a house using the mortgage and then the economy is affected a different the home prices begin to drop.  Once you are the purchase the home value will decrease below the amount of the mortgage loan. This is what the mortgage reduction seeks to protect you from.

When you take a loan, you will pay the same payment each month. So if you pay off your principal amount, your interest shall obviously reduce. One of the best ways to reduce your loan is through amortization where you reduce the amount to zero.

Keep in mind that banks are not obliged to keep up with the reduction.  For you to quality for the process, you must be having financial hardships. You should also provide documents that can show that you are experiencing challenges including the letter of hardship.

In addition to the letter, you will be required to provide documents like the utility bills, credit card statement, bank statements and the insurance policy.

Types of modification

When you are applying for the mortgage modification, you will be required to choose the type of modification that you need.  The bank shall offer you different types like;

  • Monthly income reduction; the bank shall calculate your loan monthly payment in regards to your income. You can pay up to 30% every month.
  • Interest reduction; the bank can choose to reduce your loan interest rate to about 2%. This shall enable you to pay the monthly payments with ease.
  • The loan extension time; the bank can also choose to extend your loan repayment period to about 40 years. This shall significantly reduce the monthly payments that you are going to pay.


Are frustrated with your mortgage loan? Don’t fret. There are different solutions that you can choose to help you out of your dilemma. The Mortgage principal reduction is what you are looking for.