Last Updated on July 27, 2026 by mwyckoff

What Can You Do if You Owe More on Your Mortgage Than Your Home Value?

When the balance owed on a mortgage loan is greater than the current value of the home, the property is commonly described as underwater, upside down, or having negative equity.

This situation can arise after property values decline, when a homeowner purchased with a small down payment, or when the mortgage balance has not yet been reduced significantly.

Being underwater does not automatically mean that foreclosure is inevitable. The right course of action depends on whether the homeowner can afford the current payment, expects to remain in the home, wants to sell, and qualifies for any available refinancing or mortgage-assistance option.

Pioneer Mortgage Funding helps homeowners in Sarasota, Bradenton and surrounding Southwest Florida communities evaluate whether refinancing may be available based on their current loan, property and financial circumstances.

HARP and HARP II Are No Longer Available

The Home Affordable Refinance Program, commonly known as HARP, was created after the housing crisis to help certain homeowners refinance mortgages owned or guaranteed by Fannie Mae or Freddie Mac even when their homes had little or no equity.

HARP was completed on December 31, 2018. It is no longer an available mortgage program.

This article originally discussed HARP II. It has been substantially updated because homeowners facing negative equity today must evaluate currently available mortgage, servicing, sale and loss-mitigation options rather than relying on the former HARP program.

First, Determine Whether the Home Is Actually Underwater

Before making a major decision, obtain a realistic estimate of the property’s current market value.

Useful sources may include:

• A current comparative market analysis from an experienced local real-estate professional
• A professional appraisal
• Recent sales of comparable properties
• An automated online estimate used only as an initial reference point

Subtract the estimated costs of selling from the anticipated sale price. These may include real-estate commissions, title and closing expenses, repairs, concessions and other transaction costs.

A homeowner whose mortgage balance is close to the home’s value may discover that selling costs create a practical shortfall even when the property is not technically underwater.

Option 1: Remain in the Home and Continue Making Payments

If the mortgage payment remains affordable and the homeowner wants to stay in the property, continuing to make payments may be the simplest option.

Over time:

• The mortgage balance may decline
• Property values may recover
• The homeowner may build equity
• Future refinancing or sale options may improve

Negative equity is often most urgent when the homeowner must sell, cannot afford the payment or needs to refinance. A homeowner who can comfortably maintain the mortgage may have time to allow the financial position to improve.

However, continuing to pay should be evaluated in light of the homeowner’s income, expenses, property condition, insurance costs and long-term plans.

Option 2: Determine Whether Refinancing Is Available

A traditional refinance usually depends partly on the relationship between the property value and the requested loan amount. When the mortgage balance exceeds the home’s value, ordinary refinancing may be difficult or unavailable.

Nevertheless, refinance eligibility can depend on:

• The type of existing mortgage
• Whether the loan is current
• Credit and income qualifications
• The loan balance
• Current property value
• Occupancy
• Current lender or investor guidelines
• Whether a streamlined refinance option applies to the existing loan type

Some government-backed mortgages may have refinance procedures that differ from conventional financing. Program availability and requirements change, so homeowners should not assume that an expired HARP article or an online advertisement accurately describes their current options.

A mortgage broker can review the current loan and help determine whether a refinance program appears available. Refinancing is not guaranteed, and it may not solve a broader affordability problem if the new payment would still be unsustainable.

Option 3: Contact the Mortgage Servicer Early

A homeowner who is struggling to make payments should contact the mortgage servicer promptly.

The mortgage servicer is generally the company that collects the monthly payment, manages the loan account and communicates with the homeowner about payment problems. It may be different from the company that originally made the loan.

Possible loss-mitigation options may include:

• A repayment plan
• Temporary forbearance
• A loan modification
• A short sale
• A deed in lieu of foreclosure

The options available depend on the mortgage owner or investor, the loan type, the homeowner’s hardship and the servicer’s guidelines.

Homeowners should ask the servicer for a loss-mitigation application and submit complete, accurate documentation as early as possible. Waiting until a foreclosure sale is near can reduce available time and legal protections. The CFPB advises homeowners to seek help early and notes that a timely complete application may provide important foreclosure protections while the application is evaluated.

Option 4: Sell the Home and Pay the Shortfall

A homeowner may be able to sell an underwater property by bringing sufficient money to closing to pay the difference between:

• The net sale proceeds; and
• The total mortgage payoff and closing expenses.

This may be practical where the shortfall is manageable and the homeowner has sufficient available funds.

Before listing the property, request an estimated mortgage payoff and prepare a realistic seller net sheet. This can help determine whether a standard sale is financially possible.

Option 5: Request Approval for a Short Sale

A short sale occurs when the mortgage servicer and loan owner approve a sale in which the net proceeds will be less than the amount owed on the mortgage.

The homeowner cannot simply sell the property for less than the payoff amount without obtaining the required lender or servicer approval.

A short-sale request generally requires:

• A loss-mitigation application
• Financial and hardship information
• A purchase contract
• Property and title information
• Approval from the servicer and loan owner

The CFPB advises homeowners to understand whether the lender will waive any remaining deficiency and to consider the possible tax consequences before completing a short sale.

Florida law permits deficiency claims in certain circumstances. Accordingly, the short-sale approval should be reviewed carefully to determine how the unpaid mortgage balance will be treated.

A homeowner considering a short sale should obtain appropriate legal and tax advice before signing a final agreement.

Option 6: Consider a Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is an arrangement in which the homeowner voluntarily transfers ownership of the property to the lender or loan owner to avoid completion of the foreclosure process.

It may be considered when:

• The homeowner cannot retain the property
• Refinancing or modification is unavailable
• A normal sale is not possible
• A short sale has failed or is impractical

The agreement should clearly address the remaining debt, liens, relocation terms and any other obligations. A deed in lieu should not be signed without understanding its legal, credit and tax consequences.

Option 7: Obtain Legal Advice if Foreclosure Is Threatened

Foreclosure is a legal process, and deadlines can matter.

A homeowner who has received a notice of default, foreclosure complaint or scheduled sale date should promptly consult a qualified Florida attorney. The homeowner may need advice concerning:

• The foreclosure action
• Available defenses
• Loss-mitigation rights
• Short-sale or deed-in-lieu documents
• Possible deficiency liability
• Bankruptcy considerations
• Tax consequences
• Other liens or title issues

Pioneer Mortgage Funding can help evaluate possible mortgage financing, but a mortgage broker does not replace legal or tax counsel.

Avoid Foreclosure-Relief Scams

Homeowners facing financial distress are frequently targeted by companies promising to stop foreclosure, guarantee a loan modification or obtain an immediate refinance.

Warning signs include someone who:

• Guarantees that the mortgage will be modified
• Demands large upfront fees
• Tells the homeowner to stop communicating with the servicer
• Directs mortgage payments to someone other than the servicer
• Pressures the homeowner to sign over the deed
• Refuses to explain documents clearly

The CFPB warns that foreclosure-relief scams can cost homeowners their money and even their homes.

Do not sign a deed, transfer agreement, power of attorney or mortgage-assistance contract without understanding it and obtaining reliable professional legal advice from a Florida real estate lawyer.

Which Option Is Best?

There is no single solution for every underwater homeowner.

The decision may depend on:

• Whether the mortgage payment is affordable
• Whether the homeowner wants to remain in the home
• The amount of negative equity
• The type of mortgage
• Whether payments are current
• The homeowner’s income and hardship
• The expected period of ownership
• The property’s likely future value
• Legal and tax consequences
• Whether the servicer offers an acceptable loss-mitigation option

The most important step is to act before the situation becomes more difficult.

Frequently Asked Questions

Can I refinance if I owe more than my home is worth?

Possibly, but it depends on the existing mortgage, current program requirements, property value and borrower qualifications. HARP is no longer available, but other refinance procedures may apply to certain loan types.

Does being underwater mean I will lose my home?

No. A homeowner who can afford the mortgage may continue making payments and wait for the loan balance or property value to improve. The situation becomes more urgent when the payment is unaffordable or the homeowner needs to sell.

Can I sell an underwater home?

Yes, if the mortgage and selling expenses can be paid at closing or if the lender and servicer approve a short sale.

Will a short sale eliminate the remaining mortgage debt?

Not automatically. The approval documents should state whether the remaining deficiency is waived, settled or still collectible. Legal and tax review is advisable.

Should I stop making payments while seeking assistance?

Do not stop making payments based solely on advice from an advertiser or foreclosure-relief company. Contact the mortgage servicer and obtain appropriate legal or housing-counseling advice.

Contact Pioneer Mortgage Funding

Pioneer Mortgage Funding serves homeowners and homebuyers in Sarasota, Bradenton and surrounding Southwest Florida communities.

We can help review whether a current mortgage refinance option may be available based on the homeowner’s existing loan, property and qualifications.

Michael D. Wyckoff
Pioneer Mortgage Funding

Telephone: 941-795-7525
Email: mike@goldkeymtg.com

Mortgage programs and requirements are subject to change. All loans are subject to application, underwriting, credit approval, property approval and applicable program requirements. Pioneer Mortgage Funding does not guarantee that a homeowner will qualify for refinancing or any particular loss-mitigation option.

This article provides general educational information and is not legal, tax, credit or financial advice. Homeowners facing foreclosure, a possible deficiency, debt cancellation or other legal consequences should consult appropriate qualified professionals.