Home Equity and Refinancing
Money Management

What does it mean to be underwater on a mortgage?

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Wiki User
2009-06-23 15:02:54

Being underwater means, as a homeowner, you owe more on your

mortgage than the house is worth. With the current economic issues,

they (CNN Money) say one out of five homeowners are in this


I think this may also be called Negative Equity.

If you think you may be underwater, there are a few options to


First, if you aren't planning on moving for a while - like 5+

years - don't worry too much. You are rebuilding your equity with

every payment and they say home prices will eventually rebound.

You could also think about refinancing. The government's new

mortgage-relief program let's people that owe up to 105% of their

home's value to get a loan (just as long as the current one is held

by Freddie Mac of Fannie Mae and they prove they can afford the


If you're having trouble making payments, you may be able to get

your loan restructured. Or, as a last resort, there's a short sale.

That's when your lender let's you sell the house for less than you

owe. This, though, could really drop your credit score by as much

as 200 points. That could hurt your chances of getting another loan

at terms your can afford.

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