Dealing with an underwater mortgage – a mortgage in which you owe more on your loan than your home is currently worth – is an issue that has faced all too many homeowners in recent years. Since the housing market nosedived in 2007, as many as 12 million or more homeowners found themselves at one time or another staring down an underwater mortgage. These days, homeowners have some options for dealing with underwater mortgages, thanks to some federal assistance programs and the fact that the housing market is making a slow, steady recovery.
First, many homeowners simply choose to stay and pay. There is a mentality for many people of owning up to their lot, even if it is through no specific fault of their own and simply a matter of buying at the wrong time. Nonetheless, this is an option for those with steady income and the stoicism to stand firm. But there are also other options.
Refinancing through traditional lenders is not going to be feasible with an underwater mortgage, since the lender would be basing the loan off of whatever equity you have in the home – in the case of an underwater mortgage, this equity is zero or less. But the Home Affordable Refinance Program (HARP), set up by the federal government, specifically deals with the problem of underwater mortgages, and if you meet the eligibility criteria (which are not strict), you can refinance through HARP at a much more reasonable rate.