Underwater Mortgage Relief

Does the market tell you your home is worth less than what you owe on your mortgage?  You might be underwater, but you’re not necessarily drowning. 

Try this calculation.

Divide your property taxes by 12 and add the result to your monthly mortgage payment. Then go to Craigslist or other sources and find rentals similar in size (living space only) and location to your home. 

I’m willing to bet you’re paying less right now simply for a place to live.

If you’re mortgage rate is fixed, you’re even better off. That’s because inflation allows you to pay down your loan with dollars that are worth less than when you closed your loan.

Property taxes will always march steadily up and to the right on charts. But given residential real estate values continue to stagnate, it’s unlikely tax increases will increase sharply anytime soon.

At the same time, landlords are sitting pretty as occupancy rates bump historic highs and few companies can afford to build new units. I recently listened to a quarterly earnings call by a real estate company that crowed those two factors enabled it to grow base rents by 9.1 percent through the third quarter. 

There are some caveats needed here. My calculation does not include in your cost the down payment that is likely out the window at this point. And, of course, maintenance and repairs are direct out-of-pocket costs for you while a landlord factors them into base rents.

But you can at least hope that someday, somehow, your home’s value will appreciate and you will come out ahead – however you measure that.  And in the meantime, you’ll pay less “rent.”