You are "underwater" if you owe more on it than your house is worth.  Maybe you can hold on for a long time, if you are able to make the payments with no trouble.  But being in that state creates a huge incentive to default, since you can walk away from that debt and buy the same (approx.) house back again at a much lower price.  In most of Canada you would have to declare bankruptcy to pull this off, whereas in the US case they were able to just mail the keys to the bank (jingle mail!).  In non-recourse states, that bank could ONLY repossess the house, but could not sue for the difference (lost $).  Therefore vast numbers voluntarily defaulted in the US crisis.  Here, once the gain (savings!) becomes large enough, like owing $800k on a $550k house, the same dynamic will occur.