In the lending world we use a term "Upside Down". It implies that a homeowner owes more on the home that what it is worth. There are currently government programs to help aid homeowners who want to refinance their homes to today's low interest rates but are "upside down".
How do you know if you are upside down? In underwriting, a formula is used known as Loan To Value ratio. Also known as LTV. You can calculate your home's LTV by using a very simple formula.
Divide your current mortgage balance by what your home's current market value is.
Example 1: Current mortgage balance is $115,000 and the estimated value is $150,000.
$115,000 / $150,000 = 76% The equity the homeowner has is the remaining percentage of 24%. The lender has a lien / mortgage of 76% on the home. This home would NOT be considered "upside down".
Example 2: Current mortgage balance of $115,000 and the estimated value is $110,000.
$115,000 / $110,000 = 105% There is no equity in this home. In fact, the lender has a lien / mortgage of 5% OVER the home's current value. This home is considered "upside down".
Lenders are placing mortgages at 80% LTV or higher into the HARP 2.0 program. Generally any loan over 80% would require mortgage insurance to protect the lender. The HARP 2.0 does not require mortgage insurance unless you currently have mortgage insurance on your loan.
How do you find out your home's value? You can call or email JoAnn Young who also a Licensed Realtor. Several tools are available online as well. Zillow is a viable option as the data is pulled from sales in your neighborhood.
If you believe you might be upside down in your home, give JoAnn a call today 321-243-4917 and find out how you can begin to save money each month on your mortgage payments.
