Negative Equity Mortgages
Negative equity is a major problem for both the mortgage borrower and mortgage lender.
What is a Negative Equity?
Negative equity is when the value of a property drops below the outstanding mortgage balance. Negative equity can also arise when the borrower has borrowed above the value of their property.
What is the issue with a negative equity mortgage?
A negative equity mortgage means the mortgage borrower is stuck with a mortgage debt that is unable to be repaid in full by selling the property. If many households are experiencing negative equity in a certain area at the same time the mortgage lender may be forced to make changes to their lending activity.
Some mortgage lenders offer solutions to deal with the problem caused by negative equity mortgages by allowing homeowners with negative equity to share equity with their parents home, for instance, who are likely to have enough equity to consolidate the debt.