Underwater on Your Mortgage? Here Are Some Options

Underwater on Your Mortgage? Here Are Some Options

  • Heather Smith
  • 04/11/24

When you invest in a home, you assume that it will appreciate in value over time. While the value of your home will most likely appreciate over time, it’s possible for your house to decrease in value depending on the current market conditions, and you might find yourself owing more on your mortgage than your home is actually worth.

This is what’s known as “being underwater” on your mortgage, and it can be an extremely stressful experience as a homeowner.

So, what do you do if you find yourself underwater? In an ideal world, you would wait it out in hopes that your home value would increase in the future. But if that’s not a possibility, and you need to sell, there are things you can do to get financially back on track.

A recent article from realtor.com outlined potential paths homeowners that are underwater can take when they need to sell their home, including:

  • Rent out your home. Renting out your home allows you to continue making your mortgage payments on the property, opening up the option for you to rent or buy somewhere else. Over time, you should either be able to pay off enough of your mortgage balance that you can sell without taking a major financial hit, or take advantage when the market value of your home increases again.
  • Renovate your home. As mentioned, being underwater means your home’s value is less than your mortgage balance. One way to get above water is to increase the value of the home through renovations by updating or renovating your house. Just make sure you make calculated improvements, and only spend money on projects that will improve the value more than they cost you to have done.
  • Dip into savings. If you absolutely have to sell, and you sell your home for less than the balance of your mortgage, there’s going to be additional funds due to your lender. While it’s probably not your preference, if you have a substantial savings account, you could dip into your savings to cover the balance, and be free and clear of your old mortgage.

Work With Heather

For most families, choosing a new home is the biggest financial decision they will ever make. There are many complicated decisions involved in choosing a home. As one of the top real estate professionals in the local market, I'll negotiate the best prices and terms for you and answer all of your questions as they arise.