What Can I Do About Negative Equity?

March, 2018

Selling your property can be difficult if you’re in negative equity, and it can make moving a nightmare for some homeowners. But, what exactly is it and why does it matter? Read on to find out everything about this challenging predicament and what’s the best thing to do if you find yourself in negative equity…

What is negative equity?

Your property is in negativity equity if it it’s worth less than the total mortgage secured on it. Research showed that in 2014 this affected nearly half a million UK households.

Want to find out if this applies to you? Get in touch with your lender to figure out how much you owe and then get a valuation from your local estate agent. But, to be clear, this does not affect you if you don’t have a mortgage or if you’re in rented accommodation.

Causes of negative equity

Falling house prices - this is one of the most common causes, because it leaves people living in houses that are worth less than their debt balances.

Interest-only mortgages - in these scenarios you’re not reducing the amount you’re borrowing.

Missing payments - If your home is repossessed you risk moving into negative equity

Why is it a problem?

So, you have negative equity – why is this a problem for you?

Well, if you want to sell your home you may come up against some serious battles. You will have a shortfall between your debt and what you can sell your current house for. It is also difficult if you want to re-mortgage your property, as lenders don’t let people with negative equity switch to a new deal.

How to reduce negative equity

At this point you might be wondering what on earth you can do to lessen your negative equity. Don’t panic, there a few things you can keep in mind.

Although there have been decreases in property prices, there are often upwards trends. So, try to put off selling your home until a more stable period. This way you can keep up with your mortgage repayments and reduce your negative equity over time. If you want to speed things up, you could also overpay your mortgage. But, be sure to check with your lenders as some charge extra for early repayments.

If you are in desperate need to sell, ensure your home is completely spick and span. You want to get the best sale price for your property to ensure your negative equity is reduced to the absolute minimum.

Another option is to become a negative equity landlord. If you can easily rent out your property, then the additional rent could cover the repayments and give you a bit extra as well.

Not sure if you have negative equity?

Book your free valuation at Weale and Hitchen today. We’re an independent estate agency with vast knowledge of local property in Lancashire and the surrounding areas. Our friendly team of experts are more than happy to discuss your options with you. Get in touch or visit one of our four branches in either Bury, Holcombe Brook, Ramsbottom or Rawtenstall.

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