Homeowners with an underwater mortgage may benefit from a principal reduction on their mortgage principal amount when they have experienced a steep decline in the value of their home. Homeowners are obviously frustrated with their situation when they owe more on a home than their home is worth, but there may be options available to help those in this situation.
Principal reductions from both the Making Home Affordable Program and from lenders themselves are available, but not all lenders are willing to use principal reductions as a form of assistance when dealing with underwater mortgages. Many lenders feel that principal reductions aren’t practical and they make a mortgage contract almost worthless since a homeowner agrees to pay a set amount for a home and there is no guarantee for the home’s value to increase.
However, there are options available from lenders that are not willing to use principal reductions on a wide scale. Underwater refinancing or short sales may be routes underwater homeowners can take if they are either in need of a more affordable payment on an underwater mortgage or if they simply want to be rid of the situation.
Some lenders are willing to help homeowners through principal reductions, but others feel only specific cases should get a reduction in their principal amount. Homeowners struggling with an underwater mortgage should contact their lender for specific underwater mortgage assistance options that may be available.