Mortgage Glossary
Underwater Mortgage
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
An underwater mortgage is one where the loan balance is higher than the home's current market value, leaving the owner with negative equity.
What Underwater Mortgage means
Owners go underwater when prices fall or they financed with little down. Being underwater makes it hard to sell or refinance without bringing cash to closing. Rising values or principal paydown restores positive equity over time.
Florida example
A homeowner who bought at the 2006 Florida peak owed $280,000 on a home worth $210,000 by 2010. After a decade of appreciation and paydown, the loan went back above water.
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