How Can I Lower My Monthly Mortgage Without Refinacing?

If your home mortgage is unmanageable and you are at risk of default or even foreclosure, you need to find a way to reduce your monthly expenses. Refinancing a mortgage is the most common way to lower a payment, but there is another way to do this without refinancing: a hardship program.

Difficulty:

Moderately Challenging

Instructions

Things You'll Need

• Existing mortgage paperwork
• A hardship letter
• Income documents

1. Review your payment history on your current mortgage loan. Most lenders will immediately deny a hardship application if you show no signs of payment problems--either in the past or in the near future. Pull a copy of your credit report to see your full payment history (see resources).

2. Calculate your debt-to-income ratio (DIR). Most hardship loans are offered when either your mortgage rate has adjusted--causing your payment to increase--or your employment status has changed, causing your income to decrease. To find your DIR, divide the sum of all monthly bill payments (including your mortgage) by your gross monthly income. Most lenders will not consider a hardship loan if your DIR is under 55 percent.

3. Draft a hardship letter. This letter is for you to explain to your lender exactly the need for the hardship plan. It's OK to add specific, personal details to the letter--it will remain private. In fact, the more detail, the better. You want the lender to take a sympathetic look at your case. You might also consider attaching relevant documents, too--like disability statements, doctor's notes, and pay stubs.

4. Apply for the hardship loan. Remember that these programs are temporary, in most cases, and the original mortgage contract will reactivate after the hardship expires (usually no longer than six months).

5. Wait for a response from your lender. If your application is denied, you can appeal the decision to your lending officer's manager or direct supervisor.

References

• Bankrate: Chase Mortgage Relief
• How to Write a Hardship Letter

Resources

• Annual Credit Report