What is Negative Equity?

The easiest way to describe this is to first decribe what equity is. Equity in a property is the difference between the value of the property and the mortgage one it. If you owned a house that is valued at €300,000 and the mortgage on it is €187,000 then you have equity of 37.6%. or a Loan to Value of 62.4% (add your equity to your LTV and it will be 100%).

So now that we understand equity as being the value versus the mortgage where the value is greater then you just apply the inverse to understand negative equity. Negative equity is where the value of the property is less than the mortgage on a property. Lets take the same example, except we’ll swap around value and mortgage amount. If you had a property with a mortgage on it of €300,000 and the value was €187,000 then you are in negative equity to the tune of €113,000. What does negative equity do to you?

It means that you probably can’t sell your property, …

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