Unfortunately the phrase ‘negative equity’ doesn’t often come to the forefront of anyone’s attention unless they are confronted with the concept first hand.
Many people are under the impression that being in negative equity situation means that the threat of a repossession order, but this is nothing but a myth, a falsity, and an extremely rare occurrence.
So what does it mean to be in a state of negative equity?
Well, to put it simply being in negative equity means that the amount which is outstanding on your mortgage is higher than the current value of your property. Now, providing you have no intentions to sell or remortgage your home then finding yourself in negative equity holds no impact on you whatsoever. Just because your property has lost value you cannot be threatened with repossession. Repossession only occurs if you cannot keep up with your mortgage repayments.
For many homeowners the threat of negative equity has become a reality and regrettably, this is something that neither the home owner or mortgage lender can dictate. Recent statistics show that there has been a growing number of householders who have found themselves in negative equity due to the downturn in the property market. Effecting those who chose to buy a property during the boom in the 1990’s, being in negative equity means you can just sit back and wait for the markets to pick up, stabilise and improve.
If you are considering a move or wanting to proceed with a remortgage on your home, it may be worth investigating if you have fallen into negative equity and of course, by how much. Discovering this is a relatively easy thing to do. Firstly, approach your lender and request a mortgage balance then compare that amount by the current value of your home. To find out how much money your home is currently worth you can do some research into property sales within your local area and look for homes that are comparable to yours, or you can approach a local estate agent and instruct them to carry out a market valuation of your property. If the amount you own on the mortgage surpasses the current value of your home, you are in negative equity.
What are your Options…?
If you arrive at the conclusion that you have fallen into a state of negative equity, there is very little that you can do. The best way to deal with the situation is to simply ride out the storm, continue paying your mortgage as normal and put any ideas of selling to the back of your mind for the time being.
Being in negative equity means that it is unlikely you will have the option to remortgage your home in search of a better mortgage deal, however this is not always the case and it is always worth seeking out further information and advice from and independent advisor who can make you aware of all the options available to you as a home owner to help better your immediate financial circumstances.