What is negative equity

0
991
Image of the words Negative Equity
Canstock Image

What is negative equity

Negative equity is where a property is worth less than the mortgage that is secured on it.

If the value of your property has decreased for any reason during the duration of your mortgage, you may find yourself in negative equity.

Owning a property that has negative equity can give rise to remortgaging issues, however as long as you keep up your monthly payments, you will not lose your home.

To reduce negative equity, read on.

Follow our guide:

  1. Overpay on your mortgage (most lenders allow you to overpay up to 10%).
  2. Use any savings to reduce your mortgage.
  3. Make improvements to your property to raise its value.
  4. Extend the loft of the property.  Adding additional bedrooms immediately adds value to any property.
  5. If the property is leasehold, check the lease to see if it needs to be extended.  This will raise the value of the property.
  6. Consider letting your property to a tenant and rent another property in a lower priced area.
  7. You could try renting out rooms in your property or your whole your property for periods of time through holiday letting companies or Airbnb.

If you need to sell it:

  1. Use any savings to reduce your mortgage.
  2. Make improvements to your property to raise its value.
  3. Extend the loft of the property.  Adding additional bedrooms immediately adds value to any property.
  4. Wait it out until the property value rises and the market picks up.
  5. Speak to your current lender, advise them of your situation.  They may be able to offer you a solution.
  6. Take the loss and sell the property if you are thinking of doing so.
  7. If you are desperate to move, you could consider an unsecured loan to cover the shortfall.  However, we strongly recommend that you consult with a financial professional before doing this.

If you need to remortgage it:

  1. Speak to your current lender, advise them of your situation.  They may be able to come up with a solution.
  2. Get a good mortgage broker, they may be able to find a lender for you.

If you cannot afford the mortgage payments:

  1. If you have enough bedrooms, consider renting out spare rooms.
  2. If you have a driveway, consider renting out your car space.
  3. If you can stay with friends or family, consider becoming a landlord.
  4. You could try renting out rooms in your property or your whole your property for periods of time through holiday letting companies or Airbnb.