Finance
In Louisiana, a mortgage that is 'underwater' means:
AThe property is flooded and uninhabitable
BThe outstanding mortgage balance exceeds the current market value of the property — the owner has negative equity✓ Correct
CThe property is located below sea level
DThe interest rate is variable and rising
Explanation
An underwater (or upside-down) mortgage means the homeowner owes more on the mortgage than the property is currently worth — they have negative equity. This creates difficulty selling or refinancing, as the sale proceeds would not cover the mortgage payoff.
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Key Terms to Know
Short Sale
A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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