On the topic of the mortgage crisis – one thing that keeps being lamented are the situations of people who’s mortgages are now higher than their home value. Now, no one ads any other details such as “out of work” or “fighting an illness” or anything else. Just “upside down on their mortgage” or “underwater”. Now sure, couple that WITH the rising unemployment and I get how that is a bad thing.
BUT
If (like me), you bought your house with every intention of living in it until retirement, then why should I freak if I end up upside down right now? Am I overly optimistic to be thinking that, hey, by the time I do want to move, my mortgage with be paid down significantly AND the values will have rebounded somewhat? I am not upside down (I don’t think), but I am probably close to break even perhaps. And it does not worry me at all.
Should it?
Trees & Flowers & Birds! 
That’s how I feel. We fully intend to live in our house until we die …. or at least until our kids have to drag us out of there to put us in a nursing home …. so why should I care what the market value is? Maybe it would bother me if we were in that underwater situation, but we’re not. We just had an appraisal (for a refinancing for a lower rate), and were told our house is worth almost what we paid for it a little over a year ago. And we’ve got close to 50% equity, so what do I care. Of course, at our age we should have a fully paid off house by now, but that didn’t happen. Oh well. As long as we can afford the mortgage payment, I’m not worried. If, however, my husband or I lose one of our jobs, THEN I’ll be VERY worried.
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We side with you here, since we plan tone here until retirment or later. (25-30 years from now) We figure the housing prices and the economy will be on the right track by then and if that isn’t the case then there are bigger issues going on.
I am 99% that our house is still worth more than our mortgage, but I am waiting to see what a house on my street much like mine goes for as a good estimate. They just put it in the market so it will be awhile.
In the mean time we are adding value to our house, by remodling the upstairs bathroom. (I like to say that, but in reality it is because a pipe burst and did a lot of damage. Trying to stay positive. )
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As long as you have a fixed rate mortgage, you probably should not freak out at all. Many of the people they are talking about are freaked out about being underwater because with an adjustable rate mortgage and unscrupulous lending practices, they may find that their affordable 5% mortgage suddenly jumped to a 15% rate mortgage due to the negative equity in their homes. Couple that with the fact that they may have signed loan documents without proper disclosures – for instance, a loan document that properly disclosed everything based on a certain payment but then at the end urged them to pick any payment they wanted that would result in not even covering the interest on the loan – and it spells trouble.
If you have a fixed rate mortgage that fully amortizes your mortgage loan, and you have little reason to believe you will need to sell your home prior to the loan being paid off – I wouldn’t waste any time worrying about it at all.
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