This means that Ownwell has determined that the client’s estimated home equity - based on the most recent home price estimate (or the original purchase price/estimated value, if there is not current price estimate available) minus the outstanding mortgage balance - is negative.
Ownwell uses the estimated equity as the default down payment amount for determining how much mortgage the client qualifies for. So, if this amount is negative, the client wouldn’t qualify for anything.
Resolution
Check the outstanding mortgage balance: In the Client Details tab, make sure the balance looks accurate.
If the mortgage is a variable-rate product, check the rate type. You may have marked it as variable (fixed payment) when it should be adjustable (fluctuating payment).
In rising interest rate environments, fixed-payment variable-rate mortgages can become negatively amortizing, meaning the balance grows over time.
If that’s the case, update the rate type and click Save. The outstanding balance will recalculate automatically.
Check the home value estimate: Has the home’s value declined? Even a small drop in value can wipe out the original down payment.
If you suspect the estimate is off, consider verifying the value with a trusted realtor.
You can also manually adjust the estimate within Ownwell if needed.
If the numbers are accurate: Then the client is indeed underwater on their mortgage. While this is a tough situation, it presents a valuable opportunity for you to proactively reach out, offer guidance, and explore ways to support them.