How to Deal With an Underwater Mortgage
An underwater house is more than just a financial burden
Rather than live in fear or denial, it’s smart to explore your options if you’re underwater or worried that an upside-down mortgage might be on the horizon. Thanks to soaring home prices, the national negative equity share in late 2020 hit its lowest point in over 10 years, CoreLogic reported. it’s essential to understand how to seek underwater mortgage help.
What Is an Underwater Mortgage Exactly?
Your home’s worth can shift while you’re still paying it off. An underwater mortgage, or an upside-down mortgage, means you owe more on your home than it’s worth. That puts homeowners in a poor situation: It affects their finances.
What Causes an Underwater Mortgage?
An underwater mortgage can happen in one of two ways: 1. Missed payments 2. Property value decrease
How Do I Know If I Have an Underwater House?
Those who fall behind early in their loan term may be more susceptible than others. You’ll know if your late payments have led to an upside-down mortgage if you compare your current and original principal. If the current principal is higher than it was when you first took out the loan, and the home’s value has not grown, you’re underwater.
What Are My Options if My Mortgage is Underwater?
It’s hard on any homeowner when faced with an underwater mortgage. Many people are emotionally attached to their home, making the issue even harder to work through. Some options may suit you better than others, depending on your situation.
Stay in the Home
The lender might have ways to help you avoid foreclosure such as a forbearance agreement, which would pause or reduce your payments for a limited time.
Refinance Your Mortgage
Most lenders require you to have a minimum amount of equity in your home before refinancing. Because of this, regular refinancing options won’t be available to you if you’re underwater. However, you may still use refinancing to improve your situation for loans owned or backed by Freddie Mac and Fannie Mae.
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