An equity that has a negative value (i.e., has gone underwater). This situation arises when an asset is worth less than the money used or borrowed to finance it. An example of underwater is a house whose market price is lower than the remaining value of the mortgage obtained to buy it. Here, measures of underwater include: 1) the difference between mortgage balance and underlying property value, and 2) current loan-to-value ratio (LTV ratio).
It is also known as a negative equity.
