If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, the homeowners' equity in the home would be approximately

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The homeowners purchased the home with zero down, meaning they did not put any money towards the initial purchase price. Therefore, their equity in the home at the time of purchase was zero. If the value of the home subsequently fell to $200,000, the homeowners would owe more on the mortgage than the home is worth, resulting in negative equity. The amount of their negative equity would be the difference between the current value of the home ($200,000) and the amount they still owe on the mortgage. Since they borrowed the full $250,000 with zero down, they still owe $250,000. Therefore, their equity is approximately -$50,000 ($200,000 - $250,000 = -$50,000).

If Homeowners Purchased a $250,000 Home with a Zero-Down, Interest-Only