Underwater, Under Equity or Low Equity Mortgages

Do you dream of owning a bigger home?

Have you have been told that you are “underwater” with your mortgage? Or perhaps you have heard that your home is under equity or has low equity. Do these terms have you wondering what they actually mean? The truth is you wouldn’t be the first person in America to be told this information.

Unfortunately, for the past few years many people all across the country have been told they are “underwater” with their mortgage. If you have questions about what it means to be “underwater” and how to get above water, this is the article for you.

Today, we are going to share with you a few terms you need to know when looking to sell your home. We won’t just share the definitions with you, but we will also give you some options. Your dream home could be right around the corner.

Underwater Mortgages

When someone says they are underwater with their mortgage it usually means they owe more on their house than the house is worth. Many, many Americans found themselves underwater with their mortgages in the past few years.

Although the housing market is improving, data recently published by CoreLogic as reported by USA Today indicates that almost 13% of homeowners with a mortgage are still in negative equity territory. According to Zillow.com, an example of being underwater is when your home is worth $250,000, and you owe $300,000 on the mortgage.

Under Equity or Low Equity Mortgages

The terms “under equity” or “low equity” mean that that the homeowner has less than 20% of home equity. This is important because in order to finance a mortgage without paying for private mortgage insurance (PMI), you will need to have 20% home equity.

What to Do About It

Here are 2 options that you have if you are looking to move on from your current home and have an underwater, under equity or low equity mortgage situation.

  1. Rent It Out

    If it’s time to move, but you don’t have the equity to put down on a new house, one option is to rent your current home out. You can use the rent money that you are paid to cover the new mortgage until the home value goes up.

    In our article, Michigan Home Prices Are on the Rise, we shared about how Michigan has made it into the top 5 states in America with year-over-year home prices gains.  In addition to that, median home sales prices are up 42% from last year.

  2. Make a Few Home Improvements

    A great way to increase your home’s value is by making a few home improvements. What is even better is that you don’t have to spend a tremendous amount of money to see a return on your investment. Please check out our article, Do Renovations Increase The Value of Your Home?, to find out the most cost effective renovations to do to increase the value of your home.

If you are looking to move into a new home that fits your needs or if you have questions about your situation with an underwater, under equity or low equity mortgage, please give my office a call. We would love to help you find your dream home.