Because “life happens”. You may need to move jobs, stay closer to your parents to help them as they get older, downsize after kids go to college, you may have grandkids that you want to be closer to. You may even have to move because your neighborhood demographics change and crime begins to rise. Climate change also will seriously mess things up since it’s not easily predictable at a local level.

When that life change happens, if you try to sell your house in a market downturn, it would be at a tremendous loss where you would have to cover that shortfall in one single payment. Ex: you owe $500k mortgage on a house that’s only worth $300k, you would have to find $200k in cash (and no bank will lend this) to be able to sell your property. And if you can’t do that, well…then you can’t move.

Alternatively, in a hot market, you could sell your house for 650k, and since you only owe 500k on it, you would get a $150k lump sum (tax free here in the USA). Even if you didn’t want to sell the place, you could still rent it out, and also take out a home equity line of credit, where you still could get nearly 80% of that 150k in a tax-advantaged lump sum and still have the rental cash flow coming in to pay for that loan while you’re living that lavish lifestyle. Since it’s a line of credit, you can extend this lavish lifestyle for quite a while until… you guessed it, the market tanks and you’re back underwater on your mortgage.