Negative Equity
Author: Rob K. Blake | Date: August 18, 2008 | Filed In: Glossary
Negative Equity Defined
Negative equity is when your mortgage is more than the value of your home. If you didn’t put any money down or little money down and your home goes down in value below your mortgage amount, you have negative equity. Even if the home value stays the same but due to a negative amortizing loan, the loan balance goes up, you could have negative equity.
Many people think they have (positive) equity when they do not.
If you didn’t put any money down and your home didn’t appreciate at all (a zero equity position), you may think you still have options.
But how can you sell or refinance? You can’t. (Read, “Can I refinance if the value of my house has dropped $60,000?” )
You don’t have any equity to pay the real estate commissions and other settlement costs to sell and you don’t have equity to pay closing costs to refinance. Your only option is to bring money to the closing from your own bank account. That is not a popular choice for most of us. Having a negative or zero equity position is equally debilitating for most borrowers.
Author: Rob K. Blake
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