Negative Equity

The practice has largely ended now, except for those being scammed. But the 40 year mortgage and no money down plan sold on the belief that real estate can only go up has some scary consequences. So, what happens when the real estate market softens?
For someone who put no money down on a $300,000 house with a 40-year amortization rate, the mortgage would be $311,100.
-$11,100
Amount of negative equity from Day 1.
-26,000
Amount of negative equity if house values drop 5 per cent.
-$41,100
Amount of negative equity if house values drop 10 per cent.
For someone who put 5 per cent down on a $300,000 house with a 35-year amortization rate, the mortgage would be $293,977, including CMHC premium.
-$8,977
Amount of negative equity if house values drop 5 per cent.
-$23,977
Amount of negative equity if house values drop 10 per cent.
Source: GreedyMortgage.com