It is reported that more and more homeowners, both sides of the Atlantic, are being burdened with negative equity. That is the unhappy situation when your outstanding mortgage exceeds the value of your house. It stifles the housing market, because unless they have to, people are reluctant to sell in a downturn.
Those with negative equity, who also have limited or nil savings, could not meet their outstanding mortgage loans if they were to sell their houses. This need not be a problem, because most people consider their house, and the mortgage secured against it, to be a medium to long-term investment. They believe that if they stay put, the current downturn will be over, and property prices will rise again. That has always been the case in the past, although there have been short-term hiccups.
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This time round, the situation has been made worse by injudicious lending; to people that couldn't really afford to fund the mortgages they were granted. Unfortunately, one bad turn often follows another, and a period of unemployment can fast eat into savings, or worse still, maximize other debts. It's a bit of a chain reaction that can only intensify in the impending recession. What could be worse than losing your job at the same time as property prices are falling, but the price of oil, and seemingly everything else, is rising? It may seem like a bit of a recipe for disaster.
The majority who can survive the financial storm will be alright, and come out of it virtually unscathed. But what about the unfortunate minority who are out of work and finding it difficult to meet their mortgage repayments?
The best advice is to discuss your plight with your mortgage provider at the earliest opportunity. There are various ways they may be able to help you. They might agree to extend the mortgage repayment period, or allow interest only repayments for a time. They may even consider a repayment holiday, if they believe that your setback is only temporary, and there are signs that your circumstances will improve.
There are joint equity schemes whereby loan authorities buy a stake in the property, and repayments are proportionately reduced.
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mortgages-house prices-negative equity
mortgages-house prices-negative equity
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