When you apply for a mortgage loan, you may experience a challenge when it comes to paying the loan due to different circumstances. Because of this, you may default in your payments which may put you at risk of foreclosure. Now, because of the number of people that have defaulted on the loan repayment, there has been an introduction of the mortgage principal reduction program.
This is a program that has been designed to reduce the original principal loan. It offers a different repayment plan that will suit the homeowners with financial difficulties. If you are struggling to cope with the repayment plan, this is the perfect option for you.
However, for you to qualify for the loan reduction, you need to meet the loan requirements. If you took the insured loans, then you will be in a better position to get the loan reduction.
Even though this is a government regulated program, they have given banks the freedom to modify the loans to protect themselves from financial burden. When it comes to the modification, you can get a reduction of up to 30% of the gross income of the homeowner.
The other way the loan reduction that you can choose to address the issues is to reduce the interest rate to 2%. Once the loan rate is reduced, you will be able to pay the monthly loan easily. The third option that you can choose is to extent the repayment period to 40% years. This will significantly reduce the monthly repayment.
You can also choose the forbearance option where the bank shall stop the loan repayment process for a period of time to help you in your financial hardships.
The government also has added an incentive to motivate the borrower to pay the monthly payments. When you pay your monthly payment consistently you shall receive approximately $1,000. This shall keep you motivated to pay the monthly payments. This will protect you and the bank.
Mortgage principal reduction is the perfect solution to you when you are experiencing the finical hardships. However the challenge is that people don’t seem to understand the process.