Home Buyer & Home Seller Guide

With the recent housing market collapse, numerous homes have lost their value. This has given rise to what is commonly known as “negative equity”.  When a property appreciates in value and the combined value of all liens on the property are less than the property value, this creates homeowners equity. However, if the value of the entire home loan is greater than the value of the property, you have situation of “Negative Equity”.  In this situation one of two things can happen, if you are in dire need and are finding it hard to make the repayments on your property, you will struggle to sell your property, or refinance it owing to the fact that you do not have equity in the property. However, if on the other hand, you are making sufficient money and are not struggling, and then it is only a matter of waiting it out till the real estate market recovers.  In certain cases borrowers just want to know what their options are when it comes down to a negative equity situation. Listed below are some alternatives to dealing with negative equity.

Negative Equity Help

1. Rent And Move: If you are really worried about the payments on your negative equity mortgage and require some additional income to help you tide you over the rough, it may be a good idea to rent out your property and move in with your relatives. This way your additional income in the form of rent could go towards plugging the gap between the value of your property and the amount owed. However, you may need to ensure that the insurance cover on your property has a clause, which includes provisions for tenants.
2. Rent And Buy: This strategy is a possibility for someone who has great income. The bank may be willing to allow the client to rent out the existing negative equity property and provide them with an additional mortgage to buy a new property.  It must be noted that in all likeliness the bank will increase your  interest rate owing to the fact that the amount of risk has increased with you buying a property and that in conjunction with your new buy to let property agreement.
3. Housing Association Rescue Schemes: In certain cases it may be worthwhile, to contact your local housing authorities to see whether they have any programs that can help homeowners struggling with negative equity.
4. Unsecured Personal Loans: In certain cases, negative equity borrowers can get an unsecured loan to cover the gap between the amounts owed on the house and the value of the property.  This however is subject to the fact that you will require a good credit history and will also need to display servicing capacity.

In addition to this, while dealing with negative equity a lot of consumers in the recent past have opted to a get a 125 percent refinance, also known as a negative equity loan. It must be remembered that these loans are not as easy to come by nowadays, however for qualified borrowers, there are certain institutions that still do it.  As another option you may also consider selling your home in order to avoid foreclosure proceedings being initiated on you. However in this instance you must be prepared to bear the loss.

These are some of the ways in which consumers can deal with a negative equity situation.