How Can I Negotiate With My Second Mortgage Lender to Take a Small Lump Sum Payoff?
- 1). Calculate your percentage of debt-to-income (DTI). Divide your total monthly expenses into your gross monthly income to obtain the percentage of your DTI. Observe the following example: Your debt equals $1,350 per month. Divided by your gross monthly income $3,000 it reflects a 45 percent DTI ($1,350 ÷ $3,000 = 45 %). A debt ratio above 36 percent could help you make compelling negotiations due to excessive monthly obligations.
- 2). Compare the average selling prices for homes that resemble your property type. Use online valuation services (see Resources). Determine if your combined mortgage liens exceed the estimated market value of your home. You may have an opportunity to negotiate with your second mortgage lender, as the primary lender will receive any proceeds that result from a sale or foreclosure before second or third position lien holders do.
- 3). Present your case based on a financial hardship, excessive debt ratio or "underwater mortgage"--a property having mortgage loans that amount to more than the fair market value. Send your second mortgage lender a list of your monthly bills, monthly income and information that supports your estimated property value.
- 4). Offer a lump sum contribution against your second mortgage balance to pay off the debt in full. Obtain your lender's acceptance in writing prior to making a lump sum payment.
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