If you are currently in negative equity, you may be realizing that it is harder for you to sell your home or to get another mortgage. Fortunately, there are some things that you can do and there are options available to help you.
Properties are considered to have equity in the negative if the property has less worth than the mortgage. This is normally caused by a decline in property prices. For example, if you currently own a property that you purchased for $100,000 and the mortgage on the property is $70,000. If the property is now worth $50,000, the property would have equity in the negative.
On the other hand, if you purchased a property for $100,000 and the mortgage is $70,000, and it is now worth $120,000, the property would not have equity in the negative. It is estimated that there are hundreds of thousands of properties around the United States that have equity in the negative.
Is Your Property Affected?
Many property owners do not really know if their property is affected by this or not. However, there is a simple way you can find out. Contact your lender and ask them to tell you the amount of money you still owe on the property.
The next thing that you will want to do is contact either a real estate agent or a surveyor so you can get the value of your property. If the property’s value is less than what you currently owe, it has negative equity.
What Issues Are Associated With This Type Of Equity?
This presents the most problems for those who are looking to immediately sell their properties. If you do not have the money saved to pay the difference between the value and the mortgage, you may quickly find out how difficult it is to move the property.
You may also discover that it is more difficult to secure a second mortgage on the property if it has equity that is negative. It may be a better option to try to get a fixed interest rate or a less expensive deal. Unfortunately, the majority of lenders will not allow property owners with equity that is negative to get a new mortgage deal when the current one is over. These property owners are usually moved to the standard variable rate offered by the lender.
Can You Move With Equity In The Negative?
This simplicity or complexity of moving with this type of equity will depend on several factors including:
- The amount of equity
- The value of the new property
- The amount of deposit you are able to raise for the other property
The first thing you will want to do is speak with your lender and see what type of help they can offer you. Some lenders will offer a mortgage with this type of equity and they will allow you to transfer this equity to the new property.
If you are already behind and your property has negative equity, speak to your lender. You can also speak with debt counselors to help you come up with solutions for your financial situation.