Escaping the Depths: Strategies for Underwater Mortgage Relief

May 28, 2024

Understanding Your Underwater Mortgage

Being underwater on your mortgage, meaning you owe more on your home than it’s currently worth, can be a stressful and frustrating situation. However, there are several options available to help you get out of this predicament. The key is to understand the specifics of your situation and explore the solutions that best fit your financial goals and constraints.

One of the first steps is to thoroughly evaluate your current mortgage terms, including the interest rate, the remaining loan balance, and the current market value of your home. This information will be critical in determining the best course of action.

Refinance your underwater mortgage

Refinancing can be an effective strategy for homeowners with underwater mortgages, especially if interest rates have dropped since you received your original loan. By refinancing, you may be able to secure a lower interest rate, potentially reducing your monthly payments and helping you build equity in your home more quickly.
However, it’s important to note that traditional refinancing options may not be available if your home’s value is significantly lower than your loan balance. In these cases, you may need to explore specialized programs such as the Home Affordable Refinance Program (HARP) or the Federal Housing Administration’s (FHA) Streamline Refinance program, which are designed to assist homeowners in underwater mortgage situations.

Mortgage Modification and Forbearance

Another option to consider is a mortgage modification, which involves renegotiating the terms of your existing loan with your lender. This could include extending the term of the loan, reducing the interest rate, or even forgiving the principal, all of which can help make your monthly payments more manageable.

Mortgage forbearance is a temporary solution that allows you to temporarily suspend or reduce your mortgage payments while you work to improve your financial situation. This can be a valuable option if you’re facing a temporary hardship, such as a job loss or unexpected medical expense.

Short Sales and Deeds in Lieu of Foreclosure

If refinancing or a mortgage modification are not viable options, you may need to consider more drastic measures, such as a short sale or a deed in lieu of foreclosure. In a short sale, you sell your home for less than the outstanding mortgage balance, and the lender agrees to forgive the remaining debt. In a deed in lieu of foreclosure, you voluntarily transfer ownership of your home to the lender, and the lender agrees to forgive the remaining mortgage balance.

Both of these options can have a significant impact on your credit, so it’s important to carefully weigh the pros and cons and understand the long-term consequences before making a decision.

Seek professional help

Navigating the complexities of an underwater mortgage can be overwhelming, and it’s often helpful to seek the guidance of a financial advisor or housing counselor. These professionals can provide personalized advice, help you understand your options, and guide you through the process of finding the best solution for your unique situation.
In addition, it’s important to be aware of potential scams and predatory lending practices that may target distressed homeowners. Always verify the legitimacy of any service or organization before engaging with them, and be wary of any promises that seem too good to be true.

By understanding your options and seeking professional assistance, you can take the necessary steps to address your underwater mortgage and work toward a more stable financial future.


Here are 5-7 questions and answers about getting out of an underwater mortgage:

How can I get out of my underwater mortgage?

If you are underwater on your mortgage, meaning you owe more on the home than it is currently worth, there are a few options to consider. You could try to negotiate a loan modification with your lender, which may involve reducing the principal balance, interest rate, or monthly payment. You could also look into a short sale, where you sell the home for less than what you owe and the lender agrees to forgive the remaining debt. Another option is to refinance through a government program like HARP (Home Affordable Refinance Program) if you qualify. Finally, you could consider a deed-in-lieu of foreclosure, where you voluntarily transfer ownership of the home to the lender to avoid foreclosure.

What is an underwater mortgage?

An underwater mortgage, also known as being “upside down” on your mortgage, occurs when the amount you owe on your mortgage is more than the current market value of your home. This can happen if home prices in your area have declined significantly since you purchased the home or if you made a very small down payment initially.

How can I determine if I have an underwater mortgage?

To determine if you have an underwater mortgage, you’ll need to compare the current market value of your home to the outstanding balance on your mortgage loan. You can get an estimate of your home’s market value by looking at recent sale prices of comparable homes in your area or by getting a professional appraisal. Once you have the home’s value, subtract the mortgage balance to see if you are underwater.

What are the consequences of having an underwater mortgage?

Having an underwater mortgage can have significant financial consequences. It makes it very difficult to sell your home or refinance, as you won’t have any equity. It also increases the risk of foreclosure if you are unable to make your monthly payments. Additionally, being underwater on your mortgage can negatively impact your credit score and make it harder to qualify for other loans in the future.

Are there any government programs that can help with an underwater mortgage?

Yes, there are a few government programs that may be able to assist homeowners with underwater mortgages. The Home Affordable Refinance Program (HARP) allows eligible homeowners to refinance their mortgages even if they are underwater. The Home Affordable Modification Program (HAMP) also provides options for modifying underwater mortgages to make the payments more affordable. Additionally, some state and local governments have launched their own programs to help underwater homeowners.