Published by: R. Ossovicki | 9/24/2019

What to do with an underwater mortgage?

An underwater mortgage occurs when a homeowner owes more than their home is worth.

Are you familiar with the term “underwater mortgage?” If not, we’ll give you a hint - it doesn’t involve owning a home under the sea. An underwater mortgage occurs when a homeowner owes more than their home is worth. This usually happens when property values fall and a homeowner lacks equity to use for credit. If you’re in this situation - there’s hope. While nothing is guaranteed, there are a few options you can explore if you’re stuck with an underwater mortgage.

Don’t sell your home

If circumstances allow, stay put in your home. If you don’t sell your home, you’re not losing money on an underwater sale. This shouldn’t be an issue if you love your home and neighborhood. However, if you do need to sell for any reason, you might need to take a loss, especially if your home’s value doesn’t increase in time.

Refinance your mortgage

Unfortunately, if you do not sell, refinancing won’t increase your home’s value enough to earn a profit. It can, however, help you by lowering your interest rate and monthly payment. Many mortgage lenders require at least 20% equity in your home before you can be approved for refinancing. However, the federal government offers a program called HARP (Home Affordable Refinance Program), which gives financial incentives to lenders to refinance underwater home loans. To find out if you qualify for HARP, follow this link.

If you’re interested in refinancing or want to explore your options, contact a Union Home Mortgage professional today.

Short Sale

If you must sell your home, you can try to get approved for a short sale. In this case, the mortgage lender needs to agree to you selling your home for less than what you owe. This can be difficult to get approved, as the lender is agreeing to take a loss. If you’re approved to go ahead with a short sale, the lender must then approve of any offer you receive. This could mean several offers getting rejected. A short sale can also lower your credit score, so it’s best to explore other options before you try to go this route.


If you’re dealing with an underwater mortgage or your financial situation has changed, don’t fret – our experienced mortgage professionals are here to help you. Contact a loan officer today!