what happens to your equity in a downturn?

[Chi Wen]

So we all know housing will dip/drop at some point. What happens to your equity in situations when you put down 5% vs when you put 20% down?

- Buy a 500k house and put 5% down (25k) and the next day housing prices crash and your house is now worth 400k.
- Buy a 500k house and put 20% down (100k) and the next day housing prices crash and your house is now worth 400k.

in the first case you are "underwater", correct? What does that mean exactly and what kind of real life implication does each case have assuming you keep paying your mortgage and have the same rental cashflow coming in?