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, in order to sell the house and move to another city, the homeowners would be required at closing to pay (in addition to the proceeds from the home sale)

Question

Quizplus · Accepted Answer

If the value of the home fell to $200,000, the homeowners would have negative equity in the property (meaning they owe more on their mortgage than the home is worth). Therefore, at closing, they would be required to pay the difference between the sale price and the amount owed on the mortgage, which in this case would be $50,000. In addition to this, they would also be responsible for any transaction costs and real estate fees associated with the sale of the property.

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