Are you an underwater homeowner? It’s a trying situation to be in, and made worse by not knowing how long you will be in that position.
Jack Guttentag wrote a great article on the topic, published on Inman News. Roughly 16 million owners are underwater; owing more on their mortgage than their homes are currently worth. For those underwater, the timeline to reach the desired equity position depends on three factors.
Following is a portion of the article; go to Inman.com to read more.
“About 16 million homeowners owe more on their mortgage than their homes are worth, which means they are “underwater.” So long as that condition continues, they have no equity that can be used to help finance the purchase of another house.
On the contrary, they can’t sell the house without digging into their pockets to pay the difference between what they owe and what they can realize from the sale net of expenses.
But time heals most wounds, and negative equity is no exception. The principal component of the monthly mortgage payment reduces the loan balance by the same amount.
Refinancing into a mortgage carrying a lower interest rate reduces the interest portion of the monthly mortgage payment, thereby increasing the principal component and the rate at which the balance is paid down.
Although underwater borrowers generally can’t qualify for a refinance, those fortunate enough to have their mortgages held by Fannie Mae or Freddie Mac comprise an important exception. The government’s Home Affordable Refinance Program (HARP) permits negative equity, though borrowers must be in good standing to be eligible.
The other component of negative equity, depressed home prices…”
Read more of Jack Guttentag’s article online at Inman.com here: “How long will you be underwater?”