"Underwater" is the term for a financial contract or asset that is worth less than its notional value. More commonly though, the term is used in relation to a house, or another substantial asset, which has an outstanding mortgage or loan on the asset that is a larger amount than what the asset is worth.

In either case, the holder has an asset without intrinsic value. In the case of the mortgage or loan, the holder of the asset actually owes more than the asset is worth.

Underwater is sometimes also referred to as "upside-down."