With the mortgage and down payment, the buyer pays for the home. A few months after the purchase, they find that similar homes in their area sell for much less than $400,000. Similar homes, called comparables, sell for $350,000. The value of the $360,000 loan has only gradually declined to $359,000 because much of the initial payments are interest, not principal, but the house is only worth $350,000. If the house were sold, she would not be able to repay the loan. This is called underwater or upside down. While trying to pull a container of canned food, Bob is briefly pulled underwater by a walker. After a long time, the normal course of underwater life resumed. One of Moniz`s stories is like holding your breath underwater while letting salt stab you in your fresh wounds. Such a situation can also occur with a non-financial asset. When a new car is purchased with a loan, the purchase almost immediately provokes the buyer underwater, as the car immediately loses value as soon as it is driven off the property, while the loan is slowly paid off over the years. Eventually, if more payments are made and the car depreciates more slowly, the car will be afloat again. For example, the loan is paid off in 10 years, but the owner can probably sell the car for a few thousand dollars, depending on the make and condition of the vehicle.
Nglish: Submarine translation for Spanish speakers Four years later, when Hurricane Katrina hit, 80% of the city fell underwater, at an average altitude of four feet. An asset is underwater if the price paid for it is higher than its current market value. Generally speaking, any (unrealized) loss of paper relates to an underwater asset. While a short sale complicates the process by which the original lender gets their money back, a bigger problem with underwater mortgages arose after the housing bubble of 2006-07 and the bursting of 2008-09. Homeowners who owed more than the value of their homes quietly forwent their investments. This has resulted in mortgage defaults, resulting in losses for lending banks and the additional costs of liquidating their acquired homes. In real estate, underwater refers to the situation where a house or other property is worth less than the money owed on the loan. An underwater mortgage is therefore a home loan with a capital greater than the free market value of the house. This situation can occur when property values drop.
With an underwater mortgage, the homeowner may not have equity for loans. An underwater mortgage can potentially prevent a borrower from refinancing or selling the home unless they have the money to pay for the loss out of pocket. Missing payments or additional fees for breach of credit terms can quickly increase the loan amount. This can result in a loan to move underwater or deeper underwater. Lenders are often willing to work out solutions with borrowers if the financial difficulties are short-term, as the lender does not want to go through the struggle of selling an underwater asset only partially repaying a loan at a loss. When the housing market stabilizes, the loan will eventually be repaid and the mortgage will no longer be underwater. Being underwater for a small amount or for a short period of time is not a big deal. Being underwater for a long time and to a large extent indicates a bad purchase, bad timing or bad market conditions. Maybe all three. A good deal for a home or car where the value of the asset could be sold for more than what is paid (over time) means that the loan amount is smaller and there is a larger buffer between the value of the asset and the loan amount. This means that the asset would have to lose more value to be underwater. Compare that to a couple paying too much for a house and paying $300,000 in a bidding war for a home that`s really only worth $280,000.
Depending on the amount they deposit, they could be underwater immediately, or if real estate prices drop, they could be significantly underwater in a short period of time. The house could be underwater for a number of reasons. It is possible that the buyer of the house paid too much in the first place. The house may have only been worth $350,000 from the beginning, but the seller demanded more and the buyer was willing to pay for it. Underwater (comparatively more underwater, superlative most underwater) Although they were able to make “land excursions,” he says, these animals should have been able to feed underwater. “Underwater.” Merriam-Webster.com Dictionary, Merriam-Webster, www.merriam-webster.com/dictionary/underwater. Retrieved 4 December 2022. This allows them to live in harsh environments, including underwater and underground. Being underwater with a loan is not always a terrible thing. As long as payments are made, the loan will be repaid and the underwater situation may be temporary.
That said, underwater situations can mostly be avoided by looking for a margin of safety in relation to the asset purchased and the loan amount. It was a strangely shaped block because the area was once underwater, and he took it home to take a closer look. While we can`t think of any reason why someone would intentionally want to submarinate a speaker, accidents do happen, so if you have a laptop speaker that`s always moving, it`s good to be prepared. These sample phrases are automatically selected from various online information sources to reflect the current use of the word “underwater”. The views expressed in the examples do not represent the views of Merriam-Webster or its editors. Send us your feedback. She had just enough time to save her crew before she too reached the underwater barricade. The fundamental question: the limits of the Lomonosov underwater ridge. Theoretically, the ship can accommodate all arrivals in the air, at sea, underwater or on land. The country`s research agency said the debris found in the Java Sea is similar to those previously circulated on social media, and their efforts Sunday will include both air and sea as well as underwater. Here are the dry interior caves with underwater entrances, which they preferred for their group homes. More commonly, underwater refers to a debt or loan, where it means owning an asset that is worth less than an outstanding loan for that asset.
In securities trading, this could happen in a margin account where a trader owns a leveraged stock, but the company (stock) declares bankruptcy and the stock holdings no longer cover the margin or loan that the broker originally provided to buy the shares. The account is under water, and the investor must find money elsewhere to repay the money (loan) he lost on the stock market. This is called a margin call. When Coleman, the big local guy, called the agencies for an underwater robot, I was packed into a new body and sent for a run. It was an outlet from his battery that was used to power motorized tools and lights underwater. Property values often deteriorate slowly, but can change rapidly in some areas. For example, a small town may see property values drop very quickly when the main source of employment, such as a factory or mine, closes. In both cases, the holder has an asset with no intrinsic value. In the case of a mortgage or loan, the owner of the asset actually owes more than the value of the asset. Alternatively, the value of the property may have decreased. $400,000 may have been a good price at the time, but a recent economic downturn means fewer jobs and fewer people who can afford their homes. Forced to sell, real estate values are reduced.
History of the Federal Reserve. “Subprime mortgage crisis.” Retrieved 16 September 2021. Underwater is sometimes called “upside down”. This negative value poses problems for both the owner and the mortgage holder. If the homeowner has to move, selling the home won`t bring in enough money to pay the mortgage holder, even before the transaction fee. In this case, the owner must find additional funds or make a short sale with a third party. These types of issues, in turn, lead to litigation and potential difficulties for both the original owner and the third-party lender. Let`s say a person sees a house they love for $400,000. You have $40,000 for a deposit or 10%. Without other fees and mortgage insurance, this means that part of the down payment does not go to the principal, for the sake of simplicity, suppose the buyer gets a loan of $360,000. If you have financial problems, talk to a financial planner, debt counsellor, and/or lender to find a solution before the problem escalates. Underwater mortgages were a common problem among homeowners at the height of the 2008 financial crisis, which led, among other things, to significant deflation in home prices.
“Underwater” is the term for a financial contract or asset whose value is less than its notional value. More commonly, however, the term is used in reference to a home or other significant asset that has a mortgage or loan outstanding on the asset that has an amount greater than the value of the asset.