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How to Get Out of a Bad Mortgage: Get Out of a Bad Mortgage ASAP

Updated on February 15, 2010

How to Get Out of a Bad Mortgage: Ready to Get Better Rates?

Is it possible to get out of a bad mortgage? Are you terrified of being stuck with bad rates for decades?

With a little research and some perseverance, you can get your mortgage loan re-negotiate to provide better terms and rates for you. Whether you choose to go through a professional, or tackle the lender yourself, countless homeowners have successfully negotiated better rates on their homeowner's loan.

Here are some suggestions you can try if you are searching for how to get out of a bad mortgage.

Step #1: Contact the Mortgage Lender

If you're having trouble making your monthly mortgage payments, you are far from alone. Homeowners are defaulting on their home loans in record numbers in these past several years. If you want better rates on your mortgage, your first step should be to contact your lender in writing or over the telephone. If you talk to a mortgage representative on the phone and feel like you aren't getting anywhere, ask to speak to someone in their Loss Mitigation department.

It may be harder to convince the lender that you really need help if you are still managing to make payments on time, but don't start skipping payments just to seem more desperate. The situation could spiral out of control very quickly, and your home could wind up under foreclosure.

If you are unable to make timely mortgage payments, however, this is a clear sign to the lender that you truly do need help, and you may be able to get better terms negotiated just by initiating contact with them. They would prefer to get some money out of you than none at all, obviously.

Step #2: See If Your Home Qualifies for Government Housing Legislation

If you fulfill certain requirements, you may be eligible to get your mortgage refinanced under the US government-mandated Making Home Affordable mortgage legislation. Keep in mind that your participation in this program is entirely voluntary, so it's up to you to pursue refinancing under this Act if you fulfill these qualifications:

  • You owe less on your house than it is worth (you aren't underwater on the mortgage)
  • It's your primary residence
  • Your house is worth less than $729,750
  • The mortgage was created no later than December 31, 2008
  • You can prove, through decreased income or increased mortgage payments, that you are struggling to make payments
  • Your required mortgage payments comprise 32% or greater of your regular monthly income

Step #3: See If Your Mortgage Loan Needs to Be Rewritten

During the housing craze of the years from 2005-2008, mortgage lenders drafted countless loans as quickly as possible to cater to insatiable demand. Some of those loans were so poorly written that they are littered with errors that make them unlikely to be upheld in a court of law, and you might be able to take advantage of their lack of quality.

An experienced mortgage lawyer can read through your mortgage quickly, and ascertain whether or not your mortgage has enough errors to pressure the lender into rewriting the loan completely, with more favorable terms for you at the same time. This can be a worthwhile investment for you if you borrowed money to pay for your home at the peak of the housing bubble.

Step #4: Contact an Accredited Housing Counselor

If all else fails, you may have better luck re-negotiating the terms of your mortgage through a professional housing counselor, who will contact your lender on your behalf and attempt to get a more favorable mortgage loan written for you.

Use the National Foundation for Credit Counseling website to find an appropriate counselor for you, not just an Internet search. Because people who need help managing their mortgage are usually desperate, scams and outrageously-priced services provided by amateurs are rampant on the web.


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    • personalfinances profile image

      personalfinances 8 years ago

      Great Hub Brittany. Your last point about using "the National Foundation for Credit Counseling website to find an appropriate counselor for you, not just an Internet search." is extremely valuable. Too many people fall prey to scams, especially when they are in debt.

      All the best