eli5 What does it mean to be “upside down” on your home loan and how does it happen?
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“Upside down” means the amount you owe on the mortgage is more than the home’s current value.
If you buy a house today for 100k dollars, you’ll be slowly paying off that loan for around 30 years. If the housing market collapsed tomorrow and your home is now only worth 15k dollars, you’re now looking at a loss of 85k dollars.
The question you (and your spouse) will immediately ask yourselves is, “Why are we paying a 100k mortgage for a 15k dollar house?”
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