Help For When You Find Yourself In Negative Equity

By Author: John Bregar
Total Articles: 27
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A worrying fact in today’s economic climate is that more of us are starting to feel the effects of our financial situation, and the majority of these people are struggling with negative equity and feel there is no way out of their own personal financial nightmare. With the future of today’s housing market looking bleak, you may think there is no way to tackle this problem without falling in to unmanageable debt.
Although we can’t make these financial worries disappear, we have decided to provide some help for those in the situation and what you can do to avoid falling into such a trap.

What is Negative Equity?

Negative Equity is when the value of your property (such as your home) is less than the amount of your mortgage. So if you were to buy a property worth £250,000 and then the housing market falls and in 3 years’ time and when re-valued you find it is only worth £230,000, then you may have fallen into the trap and essentially, you have more left to pay than your home is worth.

How to avoid falling ...
... into Negative Equity?

If you are reading this just after purchasing your first home, then don’t panic. There are some steps you can take to help yourself from falling into this trap. Simple things such as paying more than your monthly mortgage payment in the good times will help, as it will help to reduce your debt with your mortgage provider. Also make sure you always pay your mortgage on time as this will eliminate any unnecessary charges. Look to put some money away intoa savings account with a high interest rate so that when you require some much needed cash you have something to fall back on.

You could also look to make improvements to your home which will help to increase the market value of your property. These could be minor improvements such as redecorating or major such as an extension. Finally, ensure you do not borrow from any secondary sources as the chances are you will fall into more debt and you will start to find it even harder to manage.

What if I’m already in Negative Equity?

There are a variety of solutions and they all depend on your situation. If you have no intention of moving house, then don’t! Stay where you are and look to see through the slump in the housing market. Obviously no one can predict when the market will recover but eventually it will and if you are in a position to see this out then your property can go back or even exceed its value when you bought it.

However, if you do need to move then this is a trickier situation, but one that you can come through. Referring back to one of our earlier points, look to make overpayments on your mortgage, with the major benefit of this is that it will reduce the term of your mortgage. Further options include letting or renting out a room in your property or finding a second job so you can find an extra source of income.

It’s also advisable to seek the professional opinion of a property buyer. With the correct research, you can find a buyer who is willing to consult, advise and possibly provide you with a solution to your financial situation.