Upside down on your house

[susan1215]

I have been listening to Suzie Orman and David Rasmey for a few years now and while there has always been calls about people being upside down on their cars, it's shocking the number of calls they are getting from people who are upside down on their house. This is something that is new to me as I (and I'm sure others) just assumed that your house will go up in value and your principal will go down. We are not in this situation as we bought our house 15 years ago and it has gone up in value and we did put money down.

I attribute the increase in this to a down market, high interest subprime loans, arms adjusting and buyers not putting money down on the house they buy. I watch these house buying shows on TV where they follow a couple as they look and buy a house and at the closing most are getting an 80/20 loan and putting no money down, or an interest only loan.

So how many here have been affected by being upside down on their house?

[One Half Full]

Not me. I have a typical "prime" loan.

I think you forgot to mention "home equity loans." A lot of people borrowed on the equity of their house at a value that was highly inflated via the banking company hiring their own home inspectors to value the house. Many people took out 100K or more on a house that was not worth that amount (say, a 50K house). They might have figured that the house repairs or renovations they were doing would raise the value of the house, or perhaps they were on the boarder of a "desirable" area of town, where houses go for much more. All the information coming to the homeowner might have indicated that they would make 150K on the house when it sold. Then this whole thing hits. Suddenly the valuation of the house drops. It was not gradual, it has been coming for a while. And all of a sudden the house is again worth 50K but they are paying a 150K loan with no possible chance of making the money they would have needed to repay the loan when the house sold. Thus they are upside down (owe 150K on a 50K house).

See, as far as I understand, many people were faked out into believing that the housing bubble could not end. It was not a bubble, it was simply "prosperity in action." We are taught that pessimism is bad and that we should act to make things happen in the future. I think quite a lot of people were simply "Trusting" that the system would work.

[lovescats1956]

I was definitely upside down, due to Chase Bank which over-appraised the property making it worth less than I owed on it. Then when I tried to refinance out of an ARM, of course I was unable to. I eventually lost the house but I'm doing okay now and everything worked out.

[laurannm]

We are upside down as well, by about $80k. However both loans are fixed and at decent rates. We too were a victim of over-appraisal (I say victim, but in all reality we made the huge mistake of using our equity to consolidate CC debt and not cutting up the cards afterwards)

[chloe0724]

We too are upside down about 80k. We were dumb enouugh to use the equity to consolidate and not stop using the cards that got us there in the first place. But we are not so far upside down that we can strip the second. I wish that congress would have passed the legisation that would have let bankruptcy attorney's reduce your principal to the current markt value.