Underwater mortgage is a term used to describe a mortgage loan where the value of the property is less than the loan balance due. This is due to the decrease in value of the property or in a situation where the borrower took out a mortgage loan that was larger than the actual value of the property.

Many homeowners find themselves underwater on their mortgages as a result of economic shifts in the market. During an economic recession, property values tend to drop in comparison to the cost of a loan. Consequently, homeowners are left with a mortgage loan that is greater than the actual market value of their home.

In order to become “un-underwater”, the homeowner must make payments that increase the loan balance. This approach can help homeowners remain current on their mortgage payments thereby avoiding foreclosure. In addition, some homeowners may be able to refinance their mortgage, so long as their current mortgage balance is smaller than the current market value of the home.

Ultimately, an underwater mortgage can significantly add to the financial burden of a homeowner. It can reduce the equity within a home, lower the amount of money gained from a sale and place a strain on one’s ability to make regular mortgage payments. There are a variety of options available to those with an underwater mortgage and homeowners should take advantage of tools like home loan modification or refinancing.

These options enables the homeowner to lower their monthly payment, allowing them to make ends meet and remain in their homes. It is important to seek advice from a foreclosure prevention counselor and determine the best path forward in overcoming the underwater mortgage.