Getting back to my Personal Finance Dictionary, I’ll be introducing a word that is very relevant to me.

Word of the day (WOD) is: underwater

Definition: Underwater is a financial term more commonly known as negative equity. Negative equity means that the value of a loan for a particular asset exceeds the value of the asset.

Common Use: This term is most often used when discussing the housing market. If you’ve just crawled out from a two year stint under a rock, the housing market has been tanking. What this means is that many people who purchased a home are now finding themselves paying back a loan that well exceeds the value of their house. This term is also used when talking about buying  a new car, where the vehicle is worth “30% less” as soon as you leave the lot.

Sentence: Can you believe what’s going on with this economy? I looked up my house value on Zillow and it’s worth $40k less than what I paid for it last summer. My house is underwater and if the value drops much more I might have to look into foreclosure.