There is a disappearance of equity of late among many homeowners.
We Buy Houses – Irving TX: You may have heard the phrase ‘upside down mortgage.’ Even if your mortgage is upside down, perhaps you don’t recognize the terminology. The meaning is simple enough, and it’s also quite disturbing when it occurs. It means that you owe more on your house than it is worth on the real estate market.
That doesn’t matter so much for those who plan to remain in their homes for some time to come. The market will turn upward once again, presumably, and then they can sell at some point in the future. For those who must sell now, however, this is a great handicap and can cost you a good deal of money. There is a disappearance of equity of late among many homeowners. Let’s say you bought your house for $100k, for simplicity’s sake. Your mortgage was granted with no money down, so you started with a $100k mortgage loan.
Now let’s say that you have been paying on the mortgage for ten years, so you had built up a good deal of equity. If you had gathered $10K in equity, that equity started to disappear slowly over the last five years. In the meantime, the market has taken a dive and your house is now worth only $85k on the current market. That’s all you would be able to get for it if you chose to sell it today. If you still owe around $90k on your mortgage loan you are now upside down.
“Equity is the same thing as profit. Ideally, when you sell something you want to get a bit more for it than what you paid for it.”
There is a $5k difference between what you owe on the mortgage and what you can sell the house for. When you sell, in this case, you might need to bring that extra $5k to the closing with you. If you are like many who are in financial difficulty and trying to sell the house to avoid foreclosure, you do not have a loose $5k floating around that you can pay on your upside down mortgage.
Equity is the same thing as profit. Ideally, when you sell something you want to get a bit more for it than what you paid for it. So in a perfect world, you would want to get $90k or more for your house when you sell it. That way you can pay off your lender and save your credit. If not, you may owe more than what you can sell the house for. A real estate investor may be able to help you with that.