Owing More Than Your House Is Worth in New York
Being underwater on your mortgage — owing more than your home is currently worth — can feel like a trap. But there are options available to help you move forward, and understanding them can reduce the stress of the situation.
What Is a Short Sale
What This Situation Means
This situation, often called being 'underwater' or having negative equity, occurs when your remaining mortgage balance is higher than the current market value of your property. This can happen due to market downturns, purchasing at a market peak, or taking out additional loans against the property.
When you have negative equity, selling the property through traditional means becomes complicated because the sale proceeds won't cover what you owe the bank. This doesn't mean you're stuck, but it does mean you need to explore specific options designed for this situation.
In New York, the real estate market can vary significantly by borough and neighborhood, so it's worth getting a current assessment of your property's value before assuming you're underwater. Market conditions can change, and some areas recover faster than others.
Common Challenges Homeowners Face
- Unable to sell the property without bringing money to the closing table
- Difficulty refinancing when the property value is below the mortgage balance
- Feeling trapped in a property you may not be able to afford long-term
- Risk of foreclosure if mortgage payments become unmanageable
- Emotional stress of owing more than the property is worth
- Limited options compared to homeowners with positive equity
Options Homeowners Usually Consider
- Continue making payments and wait for the market to recover and build equity naturally
- Contact your lender about a loan modification to reduce payments or principal
- Pursue a short sale with lender approval to sell for less than what you owe
- Consult with a HUD-approved housing counselor about available programs and assistance
- Explore government programs designed to help underwater homeowners
When Selling Might Make Sense
- When you can no longer afford the mortgage payments and need relief
- When your lender agrees to a short sale and you want to avoid foreclosure
- When holding the property is causing ongoing financial hardship
- When you need to relocate and can't wait for the market to recover
Helpful Resources
Next Steps
If you're dealing with this situation and want to better understand your options, we're happy to help you talk through the possibilities.
Discuss Your Options