What to Do with an Underwater Mortgage in Fort Lauderdale

An underwater mortgage is a financial burden, but it is also an emotional one. When a home is underwater, it is easy to live in fear or denial, but it is important to explore your options. Home prices in Fort Lauderdale have soared over the recent years, and the national negative equity share hit its lowest point in more than ten years.

Still, over five percent of homeowners with a mortgage were delinquent on payments in March of 2021, including those that are in forbearance. That number is high, and it is up from 3.2 percent prior to the pandemic. Juggling an unfavorable mortgage while still trying to keep the home takes a toll on anyone that attempts to do it, but it is important to know how to seek help for an underwater mortgage.

What Exactly is an Underwater Mortgage?

Everyone knows the value of their home when they first purchase it, but that can change over time. An underwater mortgage, also sometimes referred to as an upside-down mortgage, means there is more owed on the home than what it is worth. This situation places homeowners in a precarious situation. They can catch up on payments and live on less, and it also makes it much more difficult to sell the home.

What Causes Underwater Mortgages?

Mortgages fall underwater for two reasons. The homeowner either misses several payments, or the value of the property decreases.

First, we will consider missed payments. As soon as you start making payments on your mortgage, the amortization process starts. A mortgage is essentially one really big loan that is split into equal installments that include both principal and interest. In the early years of the mortgage, most of the payment you make covers the interest. As time passes, the amortization schedule will dictate how the installments are divided and eventually, more of your payment covers the principal amount of the loan, not the interest.

When you miss a mortgage payment, the interest on the loan continues to accumulate. Compounding interest makes it even more challenging to repay the loan because missing a payment forces you to increase your monthly payment to match the interest that has accumulated. Eventually, the mortgage loan may go underwater.

While making payments on your mortgage may be somewhat in your control, the property value of your home is completely out of your control due to fluctuations in the market. For example, you may purchase a $300,000 home. Your down payment is $11,000 and your lender covers the remaining $289,000 with a mortgage loan.

At some point in the future, some of your neighbors may decide to sell their homes. With little buyer interest, your neighbors lower their asking price, which also decreases the property value of your home. After the homes are sold, you may have a remaining balance of $250,000 on your home, but it is only worth $200,000.

How to Determine if Your Home is Underwater

If you fear that your home is underwater because you have missed mortgage payments, it is quite easy to determine if your home is underwater. Your home is particularly susceptible to falling underwater if you missed mortgage payments early on in the loan. Simply compare the current principal on the loan with the original and determine which one is higher. If your home has not increased in value and your current principal is higher than the original, your home is underwater.

Determining if your home is underwater due to falling property values is a bit more complex. You should regularly monitor the prices of homes in your area because if the value of property declines, the value of your home will, as well. You should not only monitor the value of homes in your neighborhood, but in the larger surrounding area, as well.

If you want a more precise evaluation of the value of your property, you can obtain an independent appraisal. An appraiser will visit your home, inspect the condition, and compare it with other homes in your area. If the estimate you receive from the appraiser is less than the remaining balance on your mortgage, your home is underwater.

Options When Your Home is Underwater

Dealing with an underwater mortgage is very difficult, but you do have options. They include:

• Staying in your home: Start by having an honest discussion with your lender about your financial challenges. They may be able to help you avoid foreclosure with a forbearance plan, which could reduce or pause your payments for a certain period of time. Your lender may also be willing to work out a repayment plan with you, although you will have to be in a reasonably financially stable position for this to happen. You may also find help through the Department of Housing and Urban Development (HUD).
• Refinancing: Most lenders will require you to have a certain amount of equity in your home before you become eligible for refinancing. As such, it may seem as though refinancing is not an option if your home is underwater. However, refinancing may still be possible if your mortgage is federally-backed by Fannie Mae and Freddie Mac.
• Sell the home: If you do not believe that you can get caught up on your missed mortgage payments, you may have to think about selling your home. Although the proceeds from the sale likely will not provide enough to fully cover the mortgage loan, you could make up the difference.
• Defend against foreclosure: There are many defenses available for foreclosure, such as a deed in lieu. A foreclosure defense lawyer in Fort Lauderdale can explain your options and advise on which is best for your case.

Call Our Foreclosure Defense Lawyers in Fort Lauderdale Today

If your home is underwater, our Fort Lauderdale foreclosure defense lawyers are here to help. At Loan Lawyers, we have helped thousands of homeowners defend against foreclosure and stay in their homes, and we want to put that experience to work for you. Call us today at (954) 523-4357 or contact us online to schedule a free consultation and to learn more about how we can help.