It is not unusual to hear about upside down mortgages as far as vehicles are concerned.
It is a common practice on the part of the consumers to buy a new vehicle before they have paid off the loan on the existing vehicle.
In such a case the old loan and the new loan are lumped together and thus the value of the loan becomes much more than the value of the new vehicle.
The same trend is now visible in the housing market where increasing number of home owners is finding them selves straddled with up-side-down-mortgages.
The difference here though is that no new purchases are being made.
On the other hand this is solely because of the steep fall in property prices after a rapid increase in them.
Thus the consumers are now stuck with mortgages which are of higher value when compared with the value of the property.
Many markets like California are now facing an avalanche of up-side-down-mortgages.
Naturally most of these homeowners are those who bought their homes when the housing market was at its zenith.
That period had seen doubling and even tripling of property values in certain areas.
The whole situation has left the home owners non-plussed with no where to turn to.
The whole situation depends on a sole criterion, whether or not the homeowner can afford to keep paying his installments.
The situation is quite under control for those who have fixed rate mortgages, but it is spelling trouble for those who have adjustable interest rates.
Homeowners with fixed rate mortgage have a distinct edge over the others.
If other conditions are stable they can afford to wait this slump out.
Sooner or later the market will reach rock bottom and then the only way the prices will go then would be up.
As and when this happens these homeowners will be able to cover their losses and make reasonable profits.
There may be others less fortunate though.
Many homeowners may find themselves boxed into the corner with limited options.
This could be due to many reasons, losing a job could be one of them.
These unfortunate homeowners have no alternative other than that of selling their homes and moving out.
Those who have adjustable interest rates on mortgages are also in deep waters, as it may become difficult to deal with increasing monthly payments due to the increased mortgage interest rates.
Those who may not be able to cope with mortgage repayments and the ones who are finding refinancing difficult will ultimately have to give in and go for foreclosure.
The boom had let many homeowners buy their homes without having to make any significant down payments.
At that time it felt like a great deal, but the catch has sprung now.
The lesser your down payment, the lesser is your home equity.
And this is proving to be a big drawback in these difficult times, with home prices spiraling downwards.
With insignificant home equity, homeowners now have very less favorable options in front of them.
Many homeowners would like to get home equity loans.
The loans could be for home improvement or even for consolidating their debts at better rates.
This has become very difficult now as most of them have almost no home equity.
Even if they do have some home equity, the banks are not prepared to dole out further loans as default rates are becoming alarmingly high, just like the mortgage defaults.
Simply put, they are not prepared to risk more funds in this market of defaulting loans.
In many areas it is becoming near impossible to refinance loans.
The loan guidelines are stricter and the up-side-down-mortgages are no help either.
Deflated property values make it impossible to get new loans.
The whole crux of the thing is that homeowners have negative equity and no one is prepared to stick their necks out by giving them fresh loans.