Right now, Zillow is reporting that 20% of homeowners are underwater. This means that these folks owe more on their mortgages than their homes are worth. Many find themselves in this position due to declining home values. Others find that they are upside down after mortgage rate resets change how much they owe. In any case, the number of people who more than their homes are worth is up.

Who this really affects

In reality, if you are underwater, can make your payments, and don’t plan to move in the next few years, you probably don’t have much to worry about. At some point home values will start increasing again, and if you are making payments you will eventually build enough equity to put you ahead. However, if you are moving or trying to refinance, being underwater is a big disadvantage.

Many mortgage lenders won’t let you refinance if you owe more than your home is worth (the President’s Making Home Affordable plan can help some people who want to refinance up to 105% of their home’s value). If you are trying to sell, you will have to get your mortgage lender to agree to a short sale — something that can be difficult since the lender will not get the entire amount that you owe.

If you are underwater, but don’t need to leave and can still afford your mortgage payments, often it’s best to just stay put.