What is an upside down mortgage?

Whether you call it upside down, or underwater, it means the samething. It means that you have no equity in the home. In other words, the total balance owed to the lender is greater than the price at which the house can be sold.

If you bought your home in the past few years, chances are that you are in this situation. However, it’s only a problem if you need to sell your home now. If you have no need to sell, then it’s only a “paper loss”. This is similar to what has happened to most retirement accounts over the past 18 months. Provided that your homes value has not decreased do to other reasons such as a decaying neighborhood, values should recover over time.