If your home value drops below the amount you owe on your mortgage, you are in a situation known as being "underwater" or having "negative equity." Here’s what typically happens and what your options are:
1. Continue Making Payments
- No Immediate Consequences: If you continue making your mortgage payments on time, there are generally no immediate consequences, even if your home is underwater. Your mortgage terms remain the same, and your lender cannot take any action against you just because the value of your home has dropped.
- Keep Building Equity: As you make payments, you’ll gradually pay down the principal, which can help you build equity over time, especially if home values recover.