For homeowners in danger of defaulting on their loans, who have houses which are dangerously underwater or who are simply looking for relief on their monthly mortgage payments, a mortgage modification might be the way to go. Homeowners with bad credit can get a modification if they have the proper assistance, the “know how” or both. While many individuals are looking for the best fixed rate mortgages they can find, there are other options available to lower their monthly mortgage rate.

When consumer mortgage loan advocates give advice, they often state that the best way to help struggling homeowners is to give them a reduction on the principal of their mortgage, not just lower their interest rate. A principal reduction means lowering the overall value of the loan, say from a $400,000 mortgage to a $350,000 mortgage. The obvious challenge for homeowners is that banks are not required to give principal reductions, and few homeowners would even know that is an option if they negotiated on their own. Challenges such as these are why hiring a loan modification company might be in the best interest of the homeowner.

All the options for a quality mortgage modification include: lowing your interest rate; changing an adjustable interest rate to a the best fixed mortgage interest rate possible; lengthening the term of your loan from say 25 years to 35 years; or a principal reduction. Here is some important information that may help you get a principal reduction:

Ask your loan modification company about a principal reduction up front, and tell him/her that it is the option you really want. If the company understands that you know quite a bit about loan modifications, it will help you to get what you want. Read as much as you can and know what you want before you sit down with your representative.

If you negotiate with the bank by yourself, you should know that statistics show that banks can actually benefit from a principal reduction. This is especially true if your home is underwater (meaning your mortgage far exceeds the value of your home). If the bank lowers the principal on your loan to properly match the value of your house, you will be much more motivated to continue to make payments. Many people actually walk away from their homes if they owe far more on their mortgages than their houses are worth.

Read success stories, because they might give you ideas. There are countless web forums that can help you learn the successes and failures of homeowners just like you. Whether or not you use a loan modification company, knowing how other people were able to get a principle reduction might help you when you negotiate with the bank. It may also help if you have hired someone, because you can show them that others were successful in getting the reduction they needed.