Underwater On Your Mortgage? It May Not Matter
December 11th, 2009 categories: Chicago Real Estate News
If you owe more on your mortgage loan that what your house is worth, you’re far from alone, either in Chicago or nationally. A report issued earlier this month by First American CoreLogic found that nearly 410,000 Illinois mortgages were underwater in September.
These homeowners – representing 18.4 percent of Illinois home loans – face the unenviable situation of owing more on their mortgages that what their homes are currently valued at. These numbers look to get even worse: The same CoreLogic report found that an additional 5.1 percent of Illinois owners in September had less than 5 percent equity in their homes.
Nationally, according to the report, about 10.7 million homes – 23 percent of all the properties across the United States – were underwater in September. According to the report, another 2.3 million homeowners had 5 percent or less equity in their residences.
How serious is this problem? It depends on each individual homeowner.
If you’re hoping to sell your home soon, it’s far from good news to owe more on your home than what it’s worth. Of course, keep in mind that your home’s true value is determined by what buyers are willing to pay for it.
It’s also bad news if you want to refinance your existing mortgage loan to take advantage of the amazing mortgage interest rates we are now seeing. If you are underwater, the odds are that you won’t qualify for a refinance.
But what if you don’t want to sell or refinance? What if you’re happy with your current housing situation? Then it doesn’t really matter what an appraiser says your house is worth. Really, the only time your home’s value matters is when you’re selling it.
Here’s the truth about owning a home: Generally, if you hold onto it for a long enough period of time – say, five to 10 years – the odds are terrific that you’ll make a solid profit on it when you sell. If you try to sell your house after owning it just one or two years, though, you’re at the mercy of whatever’s happening in the current market.
If you’re not selling or refinancing, then, try not to worry too much about what your home is worth. Yes, no one wants to be underwater. But for the vast majority of homeowners, it really doesn’t matter one way or another.
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