Negative equity can become a serious problem for homeowners when there is difficulty in the economy. The aim of this article is not to go into detail about the economy (especially because we’re not economists!) but there is an economic cycle that sees the country go through good and bad times. Now, we do not claim to be able to say when these good and bad times will come but we do have the experience to know what we can do to help.
Ultimately, Sell My House Quickly are here to help you. If you live in West Yorkshire and you’re facing this problem then contact us and we can talk you through everything you need to know or do.
What is negative equity?
Which? defines negative equity as when your house or flat is ‘worth less than what you owe on your mortgage’. And this is the simplest way of describing what negative equity is. Equity is the difference between how much is owed on the mortgage and the value of the property. This increases with time as property prices increase and as you pay your mortgage. Each time you make a mortgage payment, that payment is made up of the interest due and what is called the ‘principle’. This is the bit that goes to paying off the amount owed. So, as you pay over the years the total amount repaid grows. Therefore, the difference between this reducing amount and the value of the property is your equity. But, how does negative equity come about?
Why is my house worth less now than when I bought it?
How can your house or flat be worth less than what you bought it for? Unfortunately, house prices can come down as much as they might go up. So, if prices do fall enough then a house or flat could have less equity in it than when it was bought.
Equity is the difference between how much the mortgage ‘debt’ is and the money that a buyer must put down as the ‘deposit’. Most mortgages require a deposit of 10% of the purchase price and the mortgage company then lends the other 90% for you to buy it. You then pay the bank back over a longer time through mortgage payments. The 10% that is paid by the buyer is the equity in the house. Therefore, if prices were to drop by more than 10% the property would be considered as having negative equity.
What to do if I have negative equity? Don’t sell…
I am moving because I want to
If the property is kept and the mortgage payments can be made then DO NOT SELL! House prices will eventually rise over time and combined with your repayments, the equity will go from negative to positive. Then you can move. Gives us a call if you want more information on how long you may have to wait before you can sell. We’d be happy to help and give you some guidance.
I don’t have a choice – I have to sell now and quickly!
However, if you did need to sell the property then there are solutions. This could include a buyer paying the mortgage debt on your behalf or even taking over the mortgage for you so that you no longer have the responsibility of paying the mortgage. This could even work in your favour because you could move quicker than if you were to complete a normal sale of the property. Call us today and we can discuss options with you.
Hopefully, this article has given you a little more information on what negative equity is and what negative equity could mean for you as a homeowner. Negative equity isn’t always as big an issue as you may think. Sell My House Quickly has over 16 years of buying houses and flats quickly to resolve homeowner’s property problems. We have a network of property professionals that can guide you through any situation that you may face. Negative equity does not mean that you will end up in irreversible debt and we always have solutions to any problem.