If you are unable to refinance your Kansas City home loan, your home may be an underwater property. Whether you call it “upside down” or “negative equity,” an underwater property is when you owe more on your home than it is actually worth.
Homeowners typically cannot refinance or sell their home unless they have the funds for closing costs and any other out-of-pocket expenses. For example, if you take out a loan for $200,000 and your home is valued at $150,000, you will owe the difference of $50,000.
Your property can become underwater if:
Thanks to the housing bubble in 2000 and a bad economy, many people had to foreclose on their homes. Since some homeowners weren’t liable for the debt, lenders couldn’t obtain a deficiency judgment and recover the money lost.
During the housing boom that inflated home prices, many lenders offered mortgages for no money down. When homes didn’t appreciate as they thought they would, consumers found themselves underwater or facing foreclosure.
If your neighbors foreclose their homes, your own real estate value can drop; especially if the home is never resold. These empty “zombie” houses drive down property values in neighborhoods because they can eventually show signs of neglect, which makes them susceptible to vandalism and crime.
If your property is underwater, you will have:
If your property is underwater, you will have difficulty refinancing your Kansas City home loan for better terms. While there are ways you can refinance an underwater property, you will want to make sure to work with an experienced lender.
If you decide to sell your home at market value while it is underwater, you still will not make enough to pay off what you owe on your Kansas City home loan. There may be a chance that you will have to sell your home for less than it is worth.
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