For those investors who are always looking for loopholes or ways to “get over” the establishment, let me tell you: You can’t beat the system. You can, however, use it for your own benefit and gain. But you can’t beat it.

Let’s say, for instance, that you wish to negotiate with the lienholder to get better terms on a mortgage, but are told they will not change the loan unless it is in default. Should you stop making payments to make that happen?

No. Simply put.

Imagine if you default on your loan. Your credit rating will suffer and no other lender will want to refinance the property. You would have made a bad situation worse. Consider these ideas:

First, consider the value of your property. If the value is less than your mortgage balance you’ll probably be unable to refinance unless you bring cash to closing. If you have a value issue then defaulting on your loan does nothing to help your situation.

Second, consider loan modification loans – for loans that are toxic, in default or likely to soon be in default. Nothing current. If you’re making payments you’re unlikely to get help when so many people have bigger problems. Another alternative: Refinance with an FHA mortgage.

Third, review your current loan. By any chance does it have a prepayment penalty? If yes, you’ll want to hold off refinancing or selling until the penalty period is over.

Fourth, hang on to what you have and wait until the market gets better. Then, raising rents or cashing out may become more feasible.

Paul – www.TheFlipBoard.com