Falling behind on your mortgage payments can quickly make you feel like you’re drowning, so its no surprise that they call it an “underwater mortgage” when someone owes more on their home than its current market value.
Fortunately, you do have options, even if your mortgage is underwater. Underwater mortgages are more common than you might think.
You’re definitely not alone; millions of Americans have been in this position and — most importantly — they’ve made it through.
Read on to learn what you can do if you find yourself underwater on your mortgage.
The Basics: Underwater Mortgage 101
What exactly does it mean to be underwater on a mortgage? For instance, let’s say you owe $300,000 on your loan.
Your home’s market value is $250,000. Your mortgage is $50,000 more than your home’s value, so you’re underwater.
How could this happen? According to Investopedia, an underwater house value may result when property values fall. If housing values deflate and you don’t have any equity (or have negative equity), you may end up underwater.
To determine your specific situation, NOLO suggests taking the following steps:
- Look at your mortgage statement to see how much you owe, a.k.a. your unpaid principal balance
- Request a payoff statement from your lender
- Include all outstanding mortgages when figuring out how much you owe
- Find prices of recently sold homes in your area with similar square footage, location, and features (these are known as “comps”)
- Use the comps to estimate your home’s market value
- Subtract your mortgage debt from your home’s value; if you owe more than your home’s market value, you may be underwater
How Does the House being Underwater Affect Selling?
If your house is underwater, how might that affect your ability to sell your home? This situation can definitely make selling the traditional way more difficult.
Buyers (understandably) are only willing to pay market value for a home, which leaves you unable to pay off the mortgage.
Having a house underwater may also keep you from refinancing. In many cases, you can’t get a new loan if your home’s current value isn’t high enough to act as security for the new loan.
A house underwater may also put you at a higher risk of foreclosure. If you’re in a position where you need to refinance or sell, but can’t, the threat of foreclosing grows.
Fortunately, you do have options. If your home is underwater, you can sell to HomeGo. HomeGo buys homes with cash, so you can quickly liquidate your asset and, ideally, pay off the mortgage. A quick, easy sale to HomeGo allows you to avoid foreclosure.
Best of all, the sale will close in as few as 7 days. Because HomeGo buys homes in as-is condition, you won’t even have to worry about inspections, appraisals, repairs, or financing falling through. Move out and move on quickly and conveniently.