An underwater mortgage, sometimes called an upside-down mortgage, is a home loan with a higher principal than the home is worth. This happens when property values fall but you still need to repay the original balance of your loan.

Can you just walk away from a mortgage?

Three of the most common methods of walking away from a mortgage are a short sale, a voluntary foreclosure, and an involuntary foreclosure. A short sale occurs when the borrower sells a property for less than the amount due on the mortgage. Involuntary foreclosure is initiated by the lender for non-payment.

What does it mean when you have an underwater mortgage?

What is an Underwater Mortgage? An underwater mortgage is when a homeowner owes more on a mortgage than your house is worth. For example, your home is worth $250,000, but you owe $300,000 on the mortgage; that means you are underwater, or upside-down on your mortgage. This is also referred to as negative equity. Why is Refinancing Beneficial?

Is it bad to be above water on your mortgage?

Still, as long as you can make the payments, this is probably the default option, and it’s not necessarily a bad one. Eventually — no matter what happens to the real estate market — you’ll be above water on the mortgage.

Which is the best program to refinance an underwater mortgage?

Some programs that may be able to help if you have an underwater mortgage include: 1 USDA Streamline Refinance Program 2 FHA Streamline Refinance Loan Program 3 High Loan-to-Value Refinance

How can I avoid foreclosure if my house is underwater?

There’s a good chance that your home is underwater if you’ve fallen behind on your monthly mortgage payments early on in your loan. You can work with your lender to get back on track with your loan and avoid foreclosure if you know that local property values are stable. Contact your lender and request a payoff statement.