It’s not hard to wind up with underwater mortgages. When you have an underwater mortgage, it can feel like you’re sinking because you find yourself in a position where you owe more than you could currently sell your home for.
How Underwater Mortgages Happen
My husband and I bought our first and current house in 2007. My husband had just returned from a year of military service in Iraq, then I got pregnant (like, right away), and we knew we were going to soon outgrow our 2-bedroom apartment. Plus, we were anxious to have our OWN place in a quiet neighborhood, where we would no longer have to listen to our apartment neighbors yelling at each other and blasting their music at 1 in the morning. (We didn’t pick the best apartment complex to live in.)
The house we bought was the 3rd house we looked at (lucky number 3, right?). It was a gem compared to the first two, and had pretty much everything we wanted, so thinking that home prices were likely to just get higher, we jumped on it. Everything went smoothly, and a few months later, our daughter Heidi was born.
However, little did we know…
We bought our house at the right time for us, but the WRONG time for the housing market.
Shortly after we bought our house, the housing market crashed, and house prices began to fall. Fortunately, interest rates went down so we refinanced a couple years later to save money over the 30-year term of the loan.
But now – 6 years later – we still owe about the same amount we bought our house for in 2007. And now its taxable value is $50,000 LESS. So we – like millions of others – are “underwater” with our mortgage. We owe more than our house is worth. [Read more…]