Last Updated on September 2, 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.