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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The shape of reduced credit in Ireland

The current market is one in which mortgage lending rose at it’s lowest rate since the mid 80’s, this is coupled with a property market which is going through a painful readjustment. The figures for how many properties remain unsold are being argued in the public domain with counts from as low as 35,000 to as high as 200,000.

There is no precise and accepted accurate figure and thus the supply side remains unknown, the other issue affecting the market is the reduced availability of credit on certain types of property (apartments in particular) and a more stringent underwriting process as well as a re-assignment of staff away from commercially gaining activity into collections and arrears departments.

What can we expect to see from lenders in the near future? We will discuss some of the possible trends that may start to come into the market.

1. Lenders introducing fees: This is not a ‘fee’ in the traditional sense, such as ‘account fees’ this is a fee paid to them as an …

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