What Is an Upside-Down Mortgage? #mortgage #minute #guy


#upside down mortgage

#

What Is an Upside-Down Mortgage?

When you buy a home, you hope the value will appreciate over time so you’ll be able to build equity. Of course, it doesn’t always work out that way.

Home values in neighborhoods can rise sharply for relatively simple reasons such as a major improvement in public transportation. Home values can also plummet.

These fluctuations can have serious financial repercussions—if you purchase before a drop, you could find yourself upside down on your mortgage .

Definition

An upside-down mortgage is simply a mortgage in which the owner owes more than the house is worth. If you can afford the monthly mortgage payments and don’t want to move, being upside down may not have an immediate effect. However, it will take longer to build equity in your home, which will affect your ability to refinance or sell your home and make a profit.

Fluctuation in home values

Volatility in neighborhood home values is the biggest cause of upside-down mortgage situations. Sometimes this instability benefits home buyers. When the housing market is strong, buyers can get a home at a relatively low price and sell it a few years later and make thousands of dollars in profit. The opposite is also true. A buyer who purchases a house at peak value stands to lose money when its value falls.

Nontraditional mortgages

Please, Mr. Postman

Send me news, tips, and promos from realtor.com and Move.

Nontraditional mortgages—also called exotic or high-risk mortgages —can lead a homeowner into an upside-down mortgage situation or make it worse. Some mortgages allow interest-only payments for the first few years, which keeps payments low but doesn t make a dent in the principal or build equity. Monthly payments on negative amortization mortgages don t even cover the full interest costs. Instead, the interest payment is deferred and added to the principal. On these mortgages, a home buyer ends up owing more than the original loan. Homeowners in the first few years of these mortgages have little equity in their home.

Selling your home

Selling when you have an upside-down mortgage can be tricky. Buying or selling a home involves additional expenses such as closing costs. lawyer fees, and real estate agent fees. Some mortgages have prepayment penalties that actually charge the mortgage holder for paying off the mortgage before it comes to term. These fees and penalties add to the cost of selling a house, and increase the amount of money that you’ll owe when leaving your home.

If selling on your own isn’t an option and you’re falling behind on payments, some lenders will accept a short sale and forgive the difference between the amount of the sale and the total mortgage loan. However, this will damage your credit and may hurt your chances of qualifying for another home in the future.

The simplest solution for homeowners with upside-down mortgages is to continue making mortgage payments, if possible, and wait for home prices to rise again before selling their homes.

Updated from an earlier version by Dini Harris

Angela Colley lives in New Orleans, where she writes about buying, selling, and renting news for realtor.com. Her passions include animal rescue, photography, historic homes, and Southern architecture.


Define: Upside-Down Loan #mortgage #calculator #with #insurance #and #taxes


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.


The Definition of Upside-Down Mortgage #mortgage #approval


#upside down mortgage

#

The Definition of Upside-Down Mortgage

The financial crisis of 2008 and 2009 created a decrease in home values across the U.S. As a result, homeowners who put little down or bought homes in areas worst affected by the crisis found themselves in an upside-down mortgage–where a home s value is less than the amount owed–creating a negative equity situation for millions of households almost overnight.

Effects

An upside-down mortgage can have dangerous consequences when a homeowner needs to sell but does not have the ability to bring cash to the table at sale time to make up for the deficit in equity. In some cases, a borrower can approach his lender for a short sale, in which the lender agrees to take a lower amount in order to competitively market the home for sale with a real estate agent. When a lender refuses a short sale, or if a struggling homeowner is unsuccessful in a short sale, foreclosure is often a result. Many homeowners who lose their home in a foreclosure suffer federal tax consequences with the Internal Revenue Service, and all have credit report damage, along with feelings of stress and low morale.

Statistics

In its February 2009 survey, the Pew Research Center for the People the Press reported that 30 percent of the mortgage holders surveyed were upside down in their mortgage. Age, income and race were all factors. Almost 25 percent of respondents who were upside down in their mortgages were under 30 years old, and 64 percent had children under 18 living at home. Mortgage holders with an annual household income under $50,000 accounted for 41 percent of upside-down respondents. Of the respondents who said they could reclaim their home’s value in a sale, 84 percent were white; only 6 percent of black respondents and 6 percent of Hispanic respondents were not upside down in their mortgages. At the end of 2009, First American Core Logic published a study that reported that 11.3 million homes–24 percent of the nation’s total–had upside-down mortgages; an additional 600,000 homes became upside down by the third quarter of 2009.

Modification

The Home Affordable Modification Program, also known as HAMP, offers qualifying homeowners who have difficulty paying their mortgage an opportunity to modify their loan. The lender reduces interest up to 2 percent and may forgive a portion of the principal loan balance, potentially creating a positive equity situation and lowering monthly payments. To qualify, the homeowner must be paying more than 31 percent of his gross income in mortgage payments for his primary residence; the residence can have from one to four units. The borrower must owe less than $729,750, as of September 2010. Homeowners must have originated their first mortgage before 2009. A three- or four-month trial period at the beginning of the program ensures that the borrower can make his new mortgage payments; after the trial period, the lender permanently modifies the mortgage.

Refinance

In September 2010 the Federal Housing Administration, or FHA, began offering the Short Refinancing loan to homeowners who have an upside-down first mortgage not initially insured by the FHA. Through the program, the homeowner’s lender forgives 10 percent or more of the home’s principal loan balance. The refinance allows a loan-to-value ratio of up to 115 percent.

Significance

An upside-mortgage is only detrimental to a homeowner who cannot afford payments or has an immediate need to move. Owners who plan to live in their home for a longer period of time and have the ability to weather the real estate market conditions can wait for the value of their home to rise again.


Define: Upside-Down Loan #calculate #home #loan


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.


The Definition of Upside-Down Mortgage #mortgage #underwriter #jobs


#upside down mortgage

#

The Definition of Upside-Down Mortgage

The financial crisis of 2008 and 2009 created a decrease in home values across the U.S. As a result, homeowners who put little down or bought homes in areas worst affected by the crisis found themselves in an upside-down mortgage–where a home s value is less than the amount owed–creating a negative equity situation for millions of households almost overnight.

Effects

An upside-down mortgage can have dangerous consequences when a homeowner needs to sell but does not have the ability to bring cash to the table at sale time to make up for the deficit in equity. In some cases, a borrower can approach his lender for a short sale, in which the lender agrees to take a lower amount in order to competitively market the home for sale with a real estate agent. When a lender refuses a short sale, or if a struggling homeowner is unsuccessful in a short sale, foreclosure is often a result. Many homeowners who lose their home in a foreclosure suffer federal tax consequences with the Internal Revenue Service, and all have credit report damage, along with feelings of stress and low morale.

Statistics

In its February 2009 survey, the Pew Research Center for the People the Press reported that 30 percent of the mortgage holders surveyed were upside down in their mortgage. Age, income and race were all factors. Almost 25 percent of respondents who were upside down in their mortgages were under 30 years old, and 64 percent had children under 18 living at home. Mortgage holders with an annual household income under $50,000 accounted for 41 percent of upside-down respondents. Of the respondents who said they could reclaim their home’s value in a sale, 84 percent were white; only 6 percent of black respondents and 6 percent of Hispanic respondents were not upside down in their mortgages. At the end of 2009, First American Core Logic published a study that reported that 11.3 million homes–24 percent of the nation’s total–had upside-down mortgages; an additional 600,000 homes became upside down by the third quarter of 2009.

Modification

The Home Affordable Modification Program, also known as HAMP, offers qualifying homeowners who have difficulty paying their mortgage an opportunity to modify their loan. The lender reduces interest up to 2 percent and may forgive a portion of the principal loan balance, potentially creating a positive equity situation and lowering monthly payments. To qualify, the homeowner must be paying more than 31 percent of his gross income in mortgage payments for his primary residence; the residence can have from one to four units. The borrower must owe less than $729,750, as of September 2010. Homeowners must have originated their first mortgage before 2009. A three- or four-month trial period at the beginning of the program ensures that the borrower can make his new mortgage payments; after the trial period, the lender permanently modifies the mortgage.

Refinance

In September 2010 the Federal Housing Administration, or FHA, began offering the Short Refinancing loan to homeowners who have an upside-down first mortgage not initially insured by the FHA. Through the program, the homeowner’s lender forgives 10 percent or more of the home’s principal loan balance. The refinance allows a loan-to-value ratio of up to 115 percent.

Significance

An upside-mortgage is only detrimental to a homeowner who cannot afford payments or has an immediate need to move. Owners who plan to live in their home for a longer period of time and have the ability to weather the real estate market conditions can wait for the value of their home to rise again.


Define: Upside-Down Loan #5 #year #mortgage


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.


Define: Upside-Down Loan #mortgage #payment #calculators


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.


What Is an Upside-Down Mortgage? #mortgage #applications


#upside down mortgage

#

What Is an Upside-Down Mortgage?

When you buy a home, you hope the value will appreciate over time so you’ll be able to build equity. Of course, it doesn’t always work out that way.

Home values in neighborhoods can rise sharply for relatively simple reasons such as a major improvement in public transportation. Home values can also plummet.

These fluctuations can have serious financial repercussions—if you purchase before a drop, you could find yourself upside down on your mortgage .

Definition

An upside-down mortgage is simply a mortgage in which the owner owes more than the house is worth. If you can afford the monthly mortgage payments and don’t want to move, being upside down may not have an immediate effect. However, it will take longer to build equity in your home, which will affect your ability to refinance or sell your home and make a profit.

Fluctuation in home values

Volatility in neighborhood home values is the biggest cause of upside-down mortgage situations. Sometimes this instability benefits home buyers. When the housing market is strong, buyers can get a home at a relatively low price and sell it a few years later and make thousands of dollars in profit. The opposite is also true. A buyer who purchases a house at peak value stands to lose money when its value falls.

Nontraditional mortgages

Please, Mr. Postman

Send me news, tips, and promos from realtor.com and Move.

Nontraditional mortgages—also called exotic or high-risk mortgages —can lead a homeowner into an upside-down mortgage situation or make it worse. Some mortgages allow interest-only payments for the first few years, which keeps payments low but doesn t make a dent in the principal or build equity. Monthly payments on negative amortization mortgages don t even cover the full interest costs. Instead, the interest payment is deferred and added to the principal. On these mortgages, a home buyer ends up owing more than the original loan. Homeowners in the first few years of these mortgages have little equity in their home.

Selling your home

Selling when you have an upside-down mortgage can be tricky. Buying or selling a home involves additional expenses such as closing costs. lawyer fees, and real estate agent fees. Some mortgages have prepayment penalties that actually charge the mortgage holder for paying off the mortgage before it comes to term. These fees and penalties add to the cost of selling a house, and increase the amount of money that you’ll owe when leaving your home.

If selling on your own isn’t an option and you’re falling behind on payments, some lenders will accept a short sale and forgive the difference between the amount of the sale and the total mortgage loan. However, this will damage your credit and may hurt your chances of qualifying for another home in the future.

The simplest solution for homeowners with upside-down mortgages is to continue making mortgage payments, if possible, and wait for home prices to rise again before selling their homes.

Updated from an earlier version by Dini Harris

Angela Colley lives in New Orleans, where she writes about buying, selling, and renting news for realtor.com. Her passions include animal rescue, photography, historic homes, and Southern architecture.


Define: Upside-Down Loan #mortgage #jobs


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.


Define: Upside-Down Loan #huntington #mortgage


#upside down mortgage

#

Upside-Down Loan

A loan secured by a collateral that has depreciated in market value and is worth less than the balance owed. For example, if you owe $5,000 on a car that is only worth $4,000, the loan is upside down.

More On Upside-Down Loan

With an upside-down loan, the collateral that secured the loan is worth less than the money owed on it. This is relatively common during the early years of car loans because cars depreciate so rapidly that it is easy to owe more on a car than it is worth. Borrowers can also be upside down on a mortgage due to a combination of falling home prices and lack of equity.

How it happens
Upside-down loans are most common in auto loans. New cars are not necessarily a good investment. As soon as you drive your new car off the lot, its value drops significantly. Therefore, it is common to owe more on a car than it is worth in the first couple of years, and the longer the term on your loan, the longer the period of time you will be upside down.

A long-term loan can be tempting. It is appealing to keep your monthly car payments as low as possible. However, since you pay so little toward principal each month, you pay a lot of extra interest. And, since you are not paying down as much of the principal, so your loan becomes upside down quickly. Later, when you go to trade-in the car, you may find that you owe the lender a few thousand dollars even after the trade-in.

How to avoid an upside-down loan.
There are a few things you can do in order to avoid owing more than your car is worth. You can get pre-qualified for an auto loan before you go car shopping.

Chances are you can find a much better rate and term than the car dealer would offer you, and that can help. Another option is to use a home equity loan rather than a car loan to buy your vehicle. You probably can get a much better interest rate since the loan is secured with your home, and the interest should be tax deductible. With this option, keep in mind that the equity you borrow will no longer be available to you upon the sale of your home. Also, think about making a large down payment that will cut the size of your principal and reduce the likelihood that you will end up with an upside-down loan. Finally, be smart. Don’t overspend on a car. It will not keep its value, and you are only in it for limited time. Buy what you can afford so that you are not tempted by terms that quickly turn into an upside-down loan.