A couple of weeks ago, the Mother Goose and Grimm comic strip featured some real estate humor that gave me a few chuckles. 

Take a look at www.Grimmy.com starting on Monday, March 5th through Saturday, March 10th.

Peters, Mike. "Mother Goose & Grimm." Comic strip. Grimmy.com. King Features, 9 Mar. 2012. Web. 19 Mar. 2012.

This comic strip from Thursday, March 8th got me to thinking about the concepts of reverse mortgage and “being upside down” which is implied with the image of the dog house being upside down.  The character is talking about a reverse mortgage, and I just thought I’d point out that these are two very different concepts.

A reverse mortgage is a type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold.  After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan. 
Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

“Being upside down” is having negative equity which occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In the United States, assets (particularly real estate, whose loans are mortgages) with negative equity are often referred to as being "underwater", and loans and borrowers with negative equity are said to be "upside down".

People (and companies) may also have negative equity, as reflected on their balance sheets.  A fall in the market value of a mortgaged house or condo is the usual cause of negative equity. Negative equity in the owner-occupied market sometimes occurs when the owner obtains second-mortgage home-equity loans, causing the combined loans to exceed the home value. If the borrower defaults, repossession and sale of the property by the lender will not raise enough cash to repay the amount outstanding, and the borrower will both have lost the property and still be in debt.

Now that I’ve gone over a little “Mortgages 101” with you, take a look at this strip that might lighten the mood:

Peters, Mike. "Mother Goose & Grimm." Comic strip. Grimmy.com. King Features, 10 Mar. 2012. Web. 19 Mar. 2012.