How Can I Eliminate My Second Mortgage at a Reduced Rate?

You can make an offer to pay off your second mortgage.

Having multiple mortgage payments can become overwhelming, but you may be able to reduce some of your debt. Perhaps you acquired a second mortgage to help purchase your home or obtained a home equity loan to make repairs to your house. You may be able to eliminate your second mortgage with a lump-sum payment or over time at a reduced rate.

Instructions

1. Examine your financial resources to determine your available options. Review the balances from your savings and investment accounts to determine if you have enough liquid funds to eliminate your second mortgage.

2. Check your budget to determine whether your current monthly expenses will allow you to make additional payments toward your second mortgage.

3. Write a letter to your second mortgage lender to request a reduced payoff amount. Ask your lender about programs that might assist homeowners who have liens that exceed the value of the property.

4. Call the lender for your second mortgage after you receive a response. Discuss the payoff figure you received and make an offer to settle the balance, based on your available funds. Ensure that you offer an amount that is above 30 percent of the outstanding balance or your lender may become reluctant to work with you.

5. Ask your lender to offer a reduced interest rate on your second mortgage. Get an agreement in writing for your reduced interest rate and lower monthly payment. Pay your original payment or more each month to eliminate your second mortgage at a reduced rate.

6. Call the lender who originated your first mortgage or a local bank to inquire about combining your first and second mortgages. Apply for a loan to refinance your first and second mortgages, while eliminating the second mortgage lien against your home.

7. Meet with an attorney to discuss filing a Chapter 13 bankruptcy if you have a financial hardship and no alternatives to bankruptcy. Begin the Chapter 13 bankruptcy process to have a bankruptcy judge review your debt and the possibility of reducing or eliminating your second mortgage balance.

References

• Federal Trade Commission: Mortgage Payments Sending You Reeling? Here's What To Do
• Nolo: Chapter 13 Bankruptcy
• "The New York Times:" A New Plan to Help Modify Second Mortgages

Resources

• Reuters: Q+A U.S. Treasury's Second-Lien Mortgage Relief Plan