What’s the best course of action when you are facing negative equity?
If you are dealing with negative equity, it’s likely that you are worried about what the future will hold for you in terms of finance.
Negative equity is when a property is worth less than the mortgage secured on it, and it’s normally caused by falling property prices. If you are currently faced with negative equity and are wondering what the best course of action to take is, read on for our advice.
How to find out whether you are in negative equity
You might not immediately know you are in negative equity, so the best way to find other whether you are is to ring your lender to find out how much money you still owe on your property. If the value of the property is below what you owe, then you are in negative equity.
Problems attached to negative equity
Unfortunately, being in negative equity can cause several different problems for yourself and your family. Firstly, negative equity is an immediate problem if you want to sell your home. Without savings to fall back on you won’t be able to pay the difference between the value of your home and the mortgage, which is going to make it very difficult for you to move.
Re-mortgaging may also be a problem. If you are hoping to achieve a fixed rate or a cheaper deal, it’s likely that most lenders will be wary of you and your finances and will not let you switch to a new mortgage deal as a result of this.
If you are unable to make the payments, you are also at risk of having your home repossessed.
How to manage negative equity
There are several steps that you can take to manage your negative equity. Firstly, you could consider overpaying your mortgage. Check whether your existing mortgage will let you make overpayments and, if so, how much you can overpay without incurring an early repayment charge.
Another option is to rent out a home that is in negative equity. In doing so you would keep the existing mortgage, but it’s likely that you would pay a higher interest rate.
Talk to us
If you are facing negative equity, there’s no need to feel as though you are going it alone.
Call 0330 159 5820