Underwater mortgage is one uncompromising scenario for homeowners. This type of incident makes a homeowner pay more mortgage than the actual value of his property. Nolo tells that "underwater mortgage" happened sometime in the year 2000 when the real estate market collapsed and caused a tremendous effect for homeowners.
An example of this scenario according to Realtor is Tiffany Doyle who happens to purchase a house priced at $289,000. Although $289k is a good amount for Doyle, what she did not expect was a recession that happened in 2007 that made the value of her house go below for an amount of $220,000.
What's most painful for homeowners experiencing "underwater mortgage" is the loss in the value of their home and the pitfalls accumulated towards it.
One problem cited in the outlet was "difficulty in selling the property." Evidently, even if a homeowner managed to find a buyer for a property, she will just receive the projected amount of the home and not the value she is paying for the mortgage. In case of Doyle, she will only receive $220,000 instead of the amount of $289,000.
Another unwanted outcome of underwater mortgage is the risk of the home to foreclose. This may be the last worst resort of a homeowner that could not make ends meet for the payment of his/her mortgage. Foreclosure happens especially when the owner is not diligent enough to pay the monthly mortgage of a home.
The circumstances of homeowners falling into a pit of "underwater mortgage" is slowly projected to lessen and even the most burdened ones are now able to recover.
"Over the past three-and-a-half years, the number of seriously underwater properties has been cut in half, but we continue to deal with a long tail of seriously underwater properties, and it will likely be another five years at least before most of those remaining underwater properties move into positive equity territory," said Daren Blomquist, vice president at RealtyTrac from Realtor.
Meanwhile Bankrate details that HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program) can help homeowners if they are facing this kind of situation. According to the outlet, if a homeowner is qualified to apply for HARP, there is a chance that they can get a loan of 105 to 125 percent while HAMP can offer incentives for those who are qualified in the program.
