I Owe More Than My House Is Worth: What Are My Options in Florida?

Owing more than your house is worth is only a problem if you need to sell or can no longer afford the payment. If neither is true, you can keep paying and wait for the balance and the market to meet. If one of them is true, Florida homeowners have a defined set of options, and the best of them work while you are still current or close to it.

Being underwater is common after a run-up in prices, a large cash-out refinance, or a second mortgage. It is a math problem, not a moral one.

When is it fine to stay?

Three questions decide it:

1. Can you pay the full housing cost, including taxes, insurance, and any association fee, for the next few years?
2. Do you expect to stay in the home that long?
3. Is the house in condition to hold its value without major work you cannot fund?

If all three answers are yes, the gap between loan and value is not a reason to act. Keep paying, keep the insurance current, and revisit once a year. If your payment went up because of escrow rather than the loan, read why did my mortgage payment go up before assuming the loan is the problem.

What if you cannot afford the payment?

Then the question is whether the shortfall is temporary or permanent. Condo owners whose buyers cannot get financing face a narrower market; my condo won’t sell because buyers can’t get a loan explains why.

Temporary (a job gap, a medical event): ask your servicer for forbearance or a modification. Modifications are evaluated on hardship and affordability, not on equity, so being underwater does not disqualify you. Fannie Mae’s version is described on our Flex modification page, and FHA’s tools on FHA loss mitigation options.

Permanent (income that is not coming back, a household that has split): a sale is usually the cleaner answer, and when the house is underwater that means a sale the lender approves for less than the balance.

Either way, apply in writing. Once a complete loss mitigation application reaches the servicer more than 37 days before a foreclosure sale, it must evaluate you for all available options and answer in writing within 30 days, and a servicer generally may not make the first foreclosure filing until the loan is more than 120 days delinquent (12 CFR 1024.41(c)(1) and (f)(1)).

What if you need to move?

A new job, a family need, or a divorce can force a sale even when payments are current. Selling underwater requires the lender’s agreement, because the net proceeds will not cover the payoff. Renting it out is the other route people consider; renting instead of selling walks through the numbers and what changes with the servicer.

Investors publish their own service levels. On a Fannie Mae loan, the servicer must acknowledge a short sale request within five business days, respond to a complete request within 30 calendar days, and the approved sale must close within 60 days of approval (Servicing Guide D2-3.3-01). Other investors set different timelines, which is why an underwater sale takes longer than an ordinary one.

What happens to the difference?

This is the question behind most underwater searches. In Florida, a lender may seek a deficiency, and for owner-occupied residential property the amount is capped at the outstanding debt minus the fair market value on the date of sale; granting it is within the court’s discretion (Fla. Stat. 702.06). A short sale does not start Florida’s one-year deficiency clock (Fla. Stat. 95.11(6)(g)), so your protection is the written release in the approval letter. On a Fannie Mae short sale without mortgage insurance, the servicer must release the borrower from the deficiency at closing (Servicing Guide D2-3.3-01).

Canceled debt can also be taxable in 2026. Read short sale taxes and the Form 1099-C before you sign.

Does a second mortgage change things?

Yes, often decisively. Every lien has to be released for the sale to close, and investors cap how much of the proceeds can go to junior lienholders. On a Fannie Mae short sale, payments to all subordinate lienholders must not exceed $6,000 in aggregate (Servicing Guide D2-3.3-01). See behind on a second mortgage or HELOC.

How do you compare the options?

Path	Keeps the home	Typical credit effect	Best when
Keep paying	Yes	None	Payment fits and you plan to stay
Modification	Yes	Depends on reporting	Hardship is real but income supports a lower payment
Short sale	No	Settled for less than full balance	You must move or the payment no longer fits
Deed in lieu	No	Similar to short sale	Lender agrees and no other liens complicate title
Foreclosure	No	Most severe, longest wait to buy again	Avoid if any other path is open

The deed in lieu vs short sale page compares the two non-keep exits in detail.

What should you do this week?

1. Get your payoff statement and an opinion of value so you know the real gap.
2. Decide honestly whether the payment fits for the next two years.
3. If it does not, call a free HUD-approved housing counselor.
4. Run the short sale qualification checker to see what your loan program would require. Nothing is saved.

Short Sale Guide is a licensed Florida real estate brokerage. This page describes federal servicing rules, Florida statutes, and a published investor guideline in general terms and is not legal, tax, or credit advice. For the real-estate side, use the file checker or call 855-725-3898.