Categorized | Real Estate

Better Home Equity For Americans. Your House Is Now Worth More Than Your Mortgage

Due to the effect of the economic meltdown of 2008, the prices of houses across America fell drastically. Many people soon found out that their houses have a new worth. The values of their homes are far less than their mortgages. This is what is referred to as negative equity and underwater mortgage.

Negative equity is when the value of an asset used to secure a loan is less than the outstanding balance on the loan. It is negative equity because if the asset is sold to repay the loan, the borrower will still be in debt after the property has been sold.

Underwater Mortgage is when the balance on the home purchase loan is higher than the market value of the home. If the homeowner decides to sell the home, he would have to pay the loss out of his pocket. In most cases, this could also prevent the homeowner from refinancing.

This scenario has played itself for a few years now across different states. However, with the increasing buyers’ confidence in the real estate industry and the number of houses going out of foreclosures, it is clear that there are better days ahead for home owners. The price of houses across different states is increasing. As the prices increase, home owners can check and reevaluate their properties. They will find that their houses are worth more than the balance on their mortgages or getting close to it.

According to research firm CoreLogic (CLGX), in a report (PDF) released on Jan. 17, said that nationally, rising home prices helped drive negative equity down to $658 billion at the end of September 2012, from $689 billion at the end of the second quarter. About 22 percent of residential properties with a mortgage, or 10.7 million, were underwater at the end of the third quarter, the firm said. The worst-hit states—Nevada, Florida, Arizona, Georgia, and Michigan—accounted for more than a third of all underwater mortgages.

At the end of 2012, the number of home purchases increased across all states. In 2013, the trend has also improved. More people are buying homes and this has increased the demand. Increase demand causes an increase in prices. The prices of homes nationally are increasing. This has caused the values of homes to climb. The prices increase is not uniform across all states. Some states like California are experiencing higher property prices and faster market recovery.

Given this facts, if you have a home that you are paying the mortgage on, you can do a reappraisal. The result would likely put a smile on your face.