Seymour's Blog

"Save $50,000 or More on your Investment Property Mortgage"

How would you like to save $50,000, $100,000, or even more on the principal balance of a mortgage on a property you purchased for purposes of a second home or for investment? Does it sound too good to be true? Well, if your circumstances meet certain required standards, you can do just that by filing a Chapter 13.

Let me give you a brief explanation of what is involved. It’s pretty straightforward. The best explanation can be given by an example.

Assume you purchased a second home in Florida in 2006, and the purchase price was $400,000. Further assume you financed $380,000, and your present mortgage balance is $375,000.

Let’s also assume that the value of the property has depreciated, and it is now worth only $250,000. Therefore, you owe $125,000 more on your mortgage than your property is worth.

You have already pulled all of your hair out, and you don’t know what to do next.

How would you like to reduce the balance on your mortgage to $250,000, the actual value of your property? If you can do that, you would save a lot more than $125,000. You'd also save all of that mortgage interest you would be paying over the next twenty five years or so. Therefore, you could be saving $250,000 or even more.

Well, there is a perfectly legal, moral and ethical way to accomplish just that result.

Chapter 13 can help you accomplish this precise result, when the circumstances are right. The law is that if you are filing for a Chapter 13 bankruptcy on an investment property or a second home, and you cannot afford to pay your unsecured debts, you should also not be required to pay more to the mortgage company than your property is actually worth.

I have many clients who have purchased properties over the last five or six years in resort areas, thinking that the property values would continue to skyrocket, and they could easily make a quick flip of the property tomake a substantial amount of extra cash.

Unfortunately, things haven’t quite worked out that way for many people who bought these properties at the top of the market cycle.

If you bought second homes or investment properties which have depreciated substantially in value, you might want to talk to an attorney who is knowledgeable with the Chapter 13 process. You could save a ton of money.

And now, for the icing on the cake. What if instead of owing $375,000 on your principal, you successfully reduce your mortgage principal to $250,000, and what if five years from now the property has appreciated in value to $350,000? All of that extra equity is yours. Once your mortgage balance has been legally reduced, it has been reduced forever, and you reap the benefits of all subsequent appreciation on the property. Pretty cool deal, huh? 

If you would like to learn more about craming down your mortgage on an investment property or on your second home, click here.