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The thought of being upside down on an automobile is not new. This event usually occurs when a buyer make the choice to buy a new auto before they have paid off their old one. As a result, the remainder of the loan on their current auto is added to the new note for the new car. The result is that the auto owner now owes more on the new auto than it is really worth.

Today, many home owners are finding they are now upside down on their home mortgages. Unfortunately, this didn't occur because they found and bought a new house and appended in the cost of their old house to the new mortgage note. This situation occurred because of the rapid increase in home prices in many areas followed by the recent housing market crash that sent house values spiraling downward.

In many areas, especially California, the lions share of homeowners are upside down on their mortgages and the number is rising at an increasing pace. These homeowners are primarily those who bought their homes at the peak of the housing boom. During that time house values doubled or tripled within a very short period of time. This precarious situation leaves many home owners wondering what they should do. Options are very often based upon whether the consumer is able to maintain their monthly home mortgage payments. While a few can continue to pay their home mortgages, particularly if they secured a fixed rate mortgage, this isn't the case with other homeowners who took out adjustable rate mortgages.

Homeowners who can afford their mortgage payments and who do not feel the pressure to sell due to loss of job, increased costs of consumables or other increases may find that they are better off by waiting out the market drop. There is a widely held belief that once the market hits bottom it will begin to climb back. If this event occurs, these homeowners still might be able to make a profit on their house once the market climbs back to previous highs.

Most other homeowners are not so lucky. In some cases, homeowners quite simply have no option but to move immediately rather than wait - usually due to relocation or job loss. Homeowners who secured adjustable rate mortgages may also find they are no longer able to afford their monthly mortgage payments as they increase with increasing interest rates. These homeowners are facing the acerbic reality of house foreclosures when they are not able to cover their debts or refinance with home mortgages because of stricter loan restrictions.

Homeowners are also facing the reality that their options are reduced because they have little if any equity in their homes. The amount of equity that a homeowner has in their home is often determined by the amount of their down payment. During the housing boom it was quite common for many buyers to purchase homes with very little, if any, down payment. At the time it seemed like a good deal; however, today it is causing significant problems as housing values continue to decline.

This situation is causing further problems for homeowners who would like to take out home equity loans either to make necessary home improvements or to consolidate higher interest debts. Even if they are among the few homeowners who do have equity in their home, they are finding that lenders are increasingly wary of making home equity loans. Just as the default rate on mortgage loans have increased, so has the default rate on home equity loans. Quite simply, lenders are no longer willing to take on risk when they are already holding a number of defaulted loans.

The ability to refinance homes has also dwindled in many locations. Not only are loan guidelines becoming stricter but most homeowners who are upside down are frequently finding the lower value of their home makes it nearly impossible to qualify for a new loan. In essence these homeowners now have negative equity and lenders are simply not willing to take on additional bank foreclosures.