{"id":75280,"date":"2026-10-28T11:00:39","date_gmt":"2026-10-28T18:00:39","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=75280"},"modified":"2026-10-28T11:00:39","modified_gmt":"2026-10-28T18:00:39","slug":"buyer-nderwater-homeowners-mortgages","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-nderwater-homeowners-mortgages\/","title":{"rendered":"Underwater Homeowners: What to Do About Your Mortgage"},"content":{"rendered":"

Discovering that you owe more on your mortgage than your home is worth can be unsettling, to say the least. It\u2019s especially troubling if you were hoping to sell<\/a>, refinance, or move soon.<\/p>\n

If you\u2019re underwater on your mortgage, your best next step typically depends on four factors:<\/p>\n

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  1. How much you owe<\/li>\n
  2. What your home could realistically sell for<\/li>\n
  3. Whether you can comfortably make your mortgage payments<\/li>\n
  4. Whether you need to move<\/li>\n<\/ol>\n

    In this guide, we\u2019ll explain what it means to have an underwater mortgage, how to calculate your potential shortfall, and the options you may have. We\u2019ll also share insights from an experienced loan officer and a top real estate agent who have worked with homeowners in your situation.<\/p>\n

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    How Much Is Your Home Worth Now?<\/h3>\n

    Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.<\/p>\n \n

    \n Get Estimate<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n
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    What does it mean to be underwater on your mortgage?<\/h2>\n

    An underwater mortgage means you owe more on your home loan than the property is currently worth. You may also hear this described as having negative equity or being upside down on your mortgage.<\/p>\n

    For example, suppose your mortgage balance is $425,000, but your home would sell for about $400,000. Based on those two numbers alone, you have roughly $25,000 in negative equity.<\/p>\n

    Home equity<\/a> is generally the difference between what your home is worth and what you owe. In the second quarter of 2026, ATTOM reported<\/a> that 3.2% of mortgaged residential properties were \u201cseriously underwater,\u201d meaning their combined loan balances were at least 25% higher than their estimated market value, up from 2.7% a year earlier.<\/p>\n

    If you\u2019re considering selling, however, that basic equity calculatio<\/a>n doesn\u2019t show how much you would actually walk away with \u2014 or need to bring to closing.<\/p>\n

    That distinction is important because selling comes with expenses, and your actual mortgage payoff may differ from the balance shown on your latest statement. The Consumer Financial Protection Bureau<\/a> explains that a payoff amount can include interest through the payoff date and certain unpaid fees in addition to the remaining loan balance.<\/p>\n

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    Does being underwater mean you\u2019re in financial trouble?<\/h2>\n

    Not necessarily, says Eric Becerra<\/a>, an experienced loan officer who has worked in the mortgage industry since 1997. He explains that homeowners need to understand an important distinction before making any decisions.<\/p>\n

    \u201cThere\u2019s a big difference between having negative equity and not being able to afford your mortgage,\u201d Becerra says.<\/p>\n

    If your payment is manageable, you\u2019re current on the loan, and you don\u2019t need to move, a drop in your home\u2019s value may not require you to do anything right away. You can continue making payments, which gradually reduces your principal balance<\/a>, and see how your home\u2019s value changes over time.<\/p>\n

    The situation becomes more pressing if you can no longer afford the mortgage<\/a>, need to relocate, want to refinance, or have another reason you can\u2019t simply stay put.<\/p>\n

    Becerra cautions homeowners against making a major decision based only on a drop in estimated value. Instead, he recommends first looking at the mortgage balance, realistic home value, interest rate, and, most importantly, the homeowner\u2019s goal.<\/p>\n

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    Find out how far underwater you really are<\/h2>\n

    If you may need to sell, don\u2019t stop at subtracting your estimated home value<\/a> from the balance shown on your mortgage statement. What matters is whether the proceeds from a sale would be enough to pay off the mortgage and the other costs and obligations tied to the transaction.<\/p>\n

    Start with these numbers:<\/p>\n