What to Do If You Have an Underwater Mortgage?

Feeling trapped by a mortgage that's bigger than your home's value? You're not alone.

In today's shifting housing market, many homeowners face the painful reality of an underwater mortgage. It can feel overwhelming, but don't worry, you have more options than you might think.

Whether you're looking to refinance, modify your loan, or explore new paths to homeownership, this guide has you covered with expert insights and actionable strategies.

• Understand what an underwater mortgage is and why it happens.
• Explore options: refinancing, loan modification, selling, or staying put.
• Learn how to minimize losses and plan for financial recovery.
• Find innovative paths to homeownership with trusted platforms.

An underwater mortgage happens when you owe more on your home loan than your property is currently worth. Also called "negative equity," this situation often arises when property values drop due to market conditions.

Example:

• Mortgage balance: $350,000
• Current home value: $300,000

You're "underwater" by $50,000.

• Market downturns
• High-interest loans with minimal down payments
• Natural disasters impact property values.

Heads up: Having an underwater mortgage can limit your options for selling, refinancing, or even moving without significant financial loss. It can also increase the risk of foreclosure if payments become unmanageable.

Pro Tip: If you're planning to move soon, understanding your equity situation is crucial to making a smart decision.

If you can afford your payments and don't need to move immediately, staying in your home may allow time for market recovery.

Upside:

• Build equity over time
• Avoid transaction costs

Watch Out:

• Property value recovery isn't guaranteed

If you're eligible, special refinance programs might help you lower your rate even with negative equity.

Examples:

• High LTV Refinance Option (Fannie Mae/Freddie Mac)

Important: Some programs have strict eligibility requirements. Always verify through official sources like Fannie Mae.

Working with your lender to modify loan terms can make monthly payments more manageable.

If you can't stay, you might sell the home for less than you owe with lender approval or voluntarily transfer ownership to avoid foreclosure.

Reminder: Always consult a housing counselor or attorney before pursuing these options.

Innovative platforms like Realpha and Be My Neighbor offer flexible solutions to today's homeowners and buyers, helping you transition to a better financial position without heavy fees or commissions.

• reAlpha: A smarter homebuying platform where you can get up to 75% of your buyer agent’s commission back at closing.

• reAlpha Mortgage: Expert mortgage guidance and innovative financing solutions tailored to your situation.

• Don't panic. Values fluctuate over time.
• Stay informed. Track local market trends.
• Talk to your lender early. Options diminish if you delay.
• Explore all avenues. Refinancing, modifications, and alternative ownership paths can be lifelines.

An underwater mortgage means you owe more on your loan than your home is worth.

Possibly, through special programs like the High LTV Refinance Option, if you meet certain requirements.

It depends. Selling at a loss could be necessary in some cases, but if you can afford to stay, waiting it out might be smarter.

Walking away can lead to foreclosure, major credit damage, and potential legal consequences. Always consult a financial advisor first.

reAlpha helps you buy smarter by unlocking up to 75% of your buyer agent’s commission back - real cash that can cover inspections, closing costs, or upgrades. reAlpha Mortgage supports you with expert guidance, competitive loan options, and flexible financing even when equity is tight.

Your Next Step: Keep More Cash at Closing

Buying your dream home doesn’t have to drain your savings. With reAlpha, you can get back up to 75% of your buyer agent’s commission - real money that can cover closing costs, moving expenses, or home improvements.

Here’s how it works:

• Get 25% back for using a reAlpha agent
• Add reAlpha Mortgage to unlock 50%
• Bundle with our Title partner to get the full 75% rebate

Start your journey the smarter way — explore how much you could save with reAlpha Mortgage.

• reAlpha Mortgage, NMLS #1743790, is an equal housing lender.
• While reAlpha and reAlpha Mortgage are affiliated, all mortgage approvals, loan terms, and underwriting decisions are independently handled by licensed mortgage professionals.
• Rates, loan terms, and eligibility requirements are subject to change without notice. Always verify current information with a licensed mortgage professional.
• This information is not intended as financial or legal advice. Please consult with a professional advisor for personalized guidance.

Find the Perfect Mortgage for Your Dream Home with reAlpha Mortgage.

Compare options, calculate payments, and get expert guidance—all in one place.

Check if you qualify

Your Next Step: Keep More Cash at Closing

Buying your dream home doesn’t have to drain your savings. With reAlpha, you can get back up to 75% of your buyer agent’s commission - real money that can cover closing costs, moving expenses, or home improvements.

Here’s how it works:

• Get 25% back for using a reAlpha agent
• Add reAlpha Mortgage to unlock 50%
• Bundle with our Title partner to get the full 75% rebate

Start your journey the smarter way — explore how much you could save with reAlpha Mortgage.

• reAlpha Mortgage, NMLS #1743790, is an equal housing lender.
• While reAlpha and reAlpha Mortgage are affiliated, all mortgage approvals, loan terms, and underwriting decisions are independently handled by licensed mortgage professionals.
• Rates, loan terms, and eligibility requirements are subject to change without notice. Always verify current information with a licensed mortgage professional.
• This information is not intended as financial or legal advice. Please consult with a professional advisor for personalized guidance.

Find the Perfect Mortgage for Your Dream Home with reAlpha Mortgage.

Compare options, calculate payments, and get expert guidance—all in one place.

Check if you qualify