Principal Balance Reduction having a 1st and 2nd Mortgage
Millions of homeowners in America are underwater and are looking for a way to get out of the rut they are stuck in. in a number of states, many people are making decisions just to walk away and abandon their homes to foreclosure. A great many are doing this without even exploring ways and means to save their homes. If you are in this category of people and you believe that you have no options left but to bail on your house, you need to read on.
Most homeowners are finding themselves in this predicament because they have two mortgages on their home. Unfortunately and against financial prudence, a good number of homeowners were convinced to take out a second mortgage on their homes. When times were good, these seemed like a good idea since the value of equity was high which justified taking out another loan. However, when the property bubble burst and the values came tumbling down, home owners with a second mortgage found themselves the worst off. Their home equity was completely wiped out or reduced to a very thin margin.
What then do you do if you have a second mortgage? Thankfully, bankruptcy law currently allows a judge to approve a loan modification of the terms of certain debts, namely, auto loans, student loans and second mortgages. Thus, if you have a second mortgage, a judge could order that debtors reduce the balance of your mortgage to an amount equal to the current property value. This would effectively reduce the total principle and leave you with lower monthly payments to grapple with. Thus, if you have a second mortgage this is one possible way of reducing your monthly mortgage payments.