According to a new report, recent home buyers are at risk of being underwater on their mortgages. Homeowners can thank record-high mortgages and sky-high home prices.
The report found that about 250,000 Americans who took out a mortgage in 2022 were now underwater.
That means the home they purchased is worth less than the loan they took out for it. When you’re underwater on your mortgage, it makes it nearly impossible to sell or refinance. If you try to sell, you likely wouldn’t get enough back to pay off the mortgage. Likewise, if you try to refinance, a lender probably won’t offer you a loan big enough to cover the previous mortgage. As Money notes, the report found that increasing home prices and rising mortgage rates pushed mortgage payments and total balances up, making recent homebuyers the most at risk of being underwater.
The good news is that you only really need to worry about your house being underwater if you’re looking to sell or refinance. Try to be patient. Even if home prices continue to decline, the best thing you can do is just keep making your mortgage payments on time. Over time, the market will settle and home prices will rise once again.