eli5 What does it mean to be “upside down” on your home loan and how does it happen?
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Imagine you buy a house for $100. You pay $20 up front and take a mortgage out for the other $80… so you still owe $80.
After a few years you’ve paid down another $5, so you still owe $75, but in that time the housing market took a hit in your area and your house is only worth $70 now (nobody would buy it for more than $70). Since you owe MORE than its actually worth… you’re considered upside down on the loan.
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