Due to the quick nature of the real estate market and other economic conditions, some may find they owe more on their home than what the property is actually worth. This can be problematic for a multitude of reasons.
When the value of your property falls, yet you still owe the balance of the original loan amount, this is called an underwater mortgage and is sometimes referred to as an upside-down mortgage.
Can you refinance if your house is underwater?
Many mortgage lenders require at least 20 percent equity to be built up before funds can be released, so if you have an underwater mortgage, you won’t be able to refinance the property.
However, if you have an existing mortgage loan that started prior to May 31, 2009, you may qualify for the HARP program which allows you to refinance your house regardless of it’s underwater status.
If you’d like to start fresh, you may consider selling your home, however you’ll need cash in hand to cover the difference still owed to your mortgage lender.
You may also consider speaking with your lender to conduct a short sell on your home. This would mean they would sell your house for less than what you currently owe, losing them money, so this isn’t the most ideal solution. It’s usually only agreed upon if it’s demonstrated you can no longer make mortgage payments on the property.
Being underwater on your mortgage may feel scary, however, working with your lender, you can map out the best solution to gain stability.
Daniel j Leeder is a REALTOR®. A Legislative Committee member of Citrus County Realtors Association. He has an extensive history of business experience. Has been a franchise owner of Tropical Touch Auto Restoration an independent contractor for Colors on Parade Inc. for 29 years. A business owner, homeowner as well has closed on properties 75 times in 3 states.
Strength of Character and a drive to please in all capacities of business and personal relationships helps him be the best choice for your Real Estate needs. Real Estate can be complicated, you need a professional in your corner to help you through the little details, and contracts, showings, and legal issues that arise with the buying or selling of one of your most expensive assets. You don't trust your Business or Home to just anybody. Consider Listing or Buying with the Captain. He will NOT steer you wrong.