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> Whats the issue with your home not being worth the debt you took on? There were tons of short sales during the last recession because people could not afford

> Whats the issue with your home not being worth the debt you took on? There were tons of short sales during the last recession because people could not afford their mortgage payments and their houses were worth less than they owed. It's a very bad situation to be in, and if you lose your job you might have no choice. Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. Being in that kind of a jam really diminishes your control over your future.

GhostVII 8y ago
The morgage payments don't change with the house price though, right? People couldn't afford to pay their morgage because they got more house than they could afford initially. But yeah being stuck in the same house because it lost value wouldn't be good.
- twblalock 8y ago
  > People couldn't afford to pay their morgage because they got more house than they could afford initially. Or they lost their jobs because of the recession.
  - derekp7 8y ago
    Not just that, but they got talked into 5-year balloon mortgages, where they would be forced to refinance after 5 years (the upside being that they got lower monthly payments than a 30-year fixed). Well, 5 years later rates have gone up to where they can't afford the new payments, so end up losing the house.
bradleyjg 8y ago
> Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. If the house price stays the same this still ends up costing you roughly 6%.
- TuringNYC 8y ago
  True. So assume they put down 20% and hae 20% equity. A sale will cost you 6% (up to 8% in places like NY where you have transfer taxes.) That leaves the person with 12% equity (of which 4-8% will wiped out on the purchase.) This is painful but they arent yet losing money they dont have. If the house is underwater (which the OP discussed) then you literally cannot sell without making up the difference.* Meaning, YOU PAY someone for them to take the house. That is a horrible situation. Also, that means you have less than 0 left to purchase the next home.
  - bradleyjg 8y ago
    The bottom line is that it's a bad idea to buy a house unless you are fairly certain that you will be staying in it for at least 6-10 years. Anything else is unduly relying on nominal price appreciation.

GhostVII 8y ago

The morgage payments don't change with the house price though, right? People couldn't afford to pay their morgage because they got more house than they could afford initially. But yeah being stuck in the same house because it lost value wouldn't be good.

twblalock 8y ago
> People couldn't afford to pay their morgage because they got more house than they could afford initially. Or they lost their jobs because of the recession.
- derekp7 8y ago
  Not just that, but they got talked into 5-year balloon mortgages, where they would be forced to refinance after 5 years (the upside being that they got lower monthly payments than a 30-year fixed). Well, 5 years later rates have gone up to where they can't afford the new payments, so end up losing the house.

bradleyjg 8y ago

> Another less bad situation is that you might need to turn down better career opportunities in other cities because you aren't able to sell your house. If the house price stays the same this still ends up costing you roughly 6%.

TuringNYC 8y ago
True. So assume they put down 20% and hae 20% equity. A sale will cost you 6% (up to 8% in places like NY where you have transfer taxes.) That leaves the person with 12% equity (of which 4-8% will wiped out on the purchase.) This is painful but they arent yet losing money they dont have. If the house is underwater (which the OP discussed) then you literally cannot sell without making up the difference.* Meaning, YOU PAY someone for them to take the house. That is a horrible situation. Also, that means you have less than 0 left to purchase the next home.
- bradleyjg 8y ago
  The bottom line is that it's a bad idea to buy a house unless you are fairly certain that you will be staying in it for at least 6-10 years. Anything else is unduly relying on nominal price appreciation.