Do you owe more on your mortgage than your home is worth? If so, you are not alone. Nearly one out of every four Americans who has a mortgage is trapped "underwater." More mortgage holders were underwater at the end of 2011 than in any previous period since 2009, when real estate research firm Corelogic first began tracking the issue.
As a practical matter being underwater can be financially paralyzing. If you need to sell your house, you might actually have to pay the bank to take it off your hands. Emotionally, living underwater is essentially the American Dream in reverse. A nightmare in which your (probably) largest financial asset might never regain its value.
To help sort it out, HSH, a company that conducts independent research into mortgage loans, has launched a new calculator to help determine when you'll get back to the break-even point on your home loan.
After you input the basic information about your loan -- how much you owe, the interest rate, the current value of your home -- you can experiment with various scenarios: Would your situation improve more quickly if you made extra mortgage payments?
HSH collects data directly from bank branches across the country, analyzing the numbers to report on a variety of mortgage-related topics, ranging from technical reports directed at the industry to more consumer-friendly advice.
The new calculator produces a chart showing the date at which the value of your home will equal the outstanding balance on your mortgage. From that point forward, assuming your local real estate market continues to improve, you will begin rebuilding equity.
Some underwater borrowers have simply chosen to stop making payments and "strategically default" on their loan. It's hard to know what percentage of mortgage defaults are strategic, but anecdotally the phenomenon seems to be on the rise. One study by the University of Chicago Booth School of Business posits that the the percentage of mortgage holders who intentionally walk away from their loan increased to 35 percent by the fall of 2010 from 25 percent in the spring of 2009.