How To Avoid Negative Equity And What To Do If You Are Already In It.

How To Avoid Negative Equity And What To Do If You Are Already In It.

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What is negative equity?
Negative equity occurs when the value of your property is less than the value of your mortgage.
If there is a significant decrease in the market value of your property, negative equity may result. This is particularly the case if your mortgage is a large proportion of your propertys value. Due to the economic climate and subsequent downturn in the property market, more and more homeowners are struggling with this problem and are facing a huge dilemma as to what to do.
Be aware of property market conditions?
It is always important to be aware of market conditions when buying and if possible to put down as large a deposit as possible. If you bought a property at the peak of the market when the housing bubble burst, the value of your property may well have fallen significantly since, possibly resulting in negative equity. Timing is critical in any market and the housing market is no different. Hence, if you are considering buying a property you should conduct research to assess the trends in local, regional and national house prices.
What happened to cause negative equity?
Unfortunately, the housing market is difficult to predict, even for the experts. Few people predicted the US sub-prime crisis and the credit crunch, global recession and housing market crash which consequently followed.
The UK was not immune from the dodgy lending practices occurring in the US. UK banks practice of lending to people, who they knew were at a high risk of not being able to pay their mortgage, combined with the decline in house prices, led to negative equity affecting around 2m UK households in 2009.
Financial Services Authority (FSA), The Council of Mortgage Lenders (CML) & Experian credit ratings agency - research on Negative Equity facts and figures
According to The Financial Services Authority (FSA) in March 2010 there are 500,000 buy-to-let investors and two million homeowners who are in negative equity.
As a result half of buy-to-let borrowers and one in four homeowners with mortgages are unable to sell their properties or even remortgage until property prices rise again. These figures are unlikely to decrease significantly since unemployment is still high, rates are due to rise and the economic recovery is weak.
The worst prediction is by research company GfK NOP, which believes that 3.8 million borrowers are in negative equity, also a further 1.2 million people will be in the danger zone this year. That's a total of 5 million mortgage borrowers.
The Council of Mortgage Lenders (CML) suggests the following:
An extra 600,000 UK mortgage holders now have less than only 5% equity in their homes.
Also a further 500,000 UK mortgage holders now have only 5% to10% equity in their homes.
In total, around 2 million mortgage borrowers could not raise 10% deposit from the equity in their house if they wanted to sell.
Recent research carried out by credit ratings agency Experian shows the highest risk of negative equity in England is in the Calderwood Street postal area in Woolwich, London! Where the average mortgage is 91.1 per cent of the property value.
Within the next 18 months the Financial Services Authority, has issued a warning that more than a million families are now in danger of losing their homes.
Is negative equity a problem?
Negative equity is only a problem if you need to sell your property. So the problem is not negative equity - such problems may be divorce, job loss or relocation, ill health, these are the main reasons why people need to sell unexpectedly.
Call your lender urgently
If you are having trouble with your mortgage repayments and can no longer afford to pay your monthly mortgage payments you should talk to your lender as soon as possible.
Some lenders may allow you to change your mortgage payments to interest only, which lowers your monthly costs. You may find it useful to also talk to your local authority housing department or housing association.
Of course, you may be able to hang in there your financial situation may improve and the value of your property may bounce back. However, the housing market is predicted to remain depressed for a long time, so you shouldnt feel too confident about your property value increasing significantly and relying on something so unpredictable.
Negative equity mortgages are available through certain lenders they allow people to move home despite being in negative equity on their current home. However, the borrowing rates tend to be so high that your debt problems are likely to worsen dramatically.
Because banks are now tightening their lending criteria, this means that many people cannot switch to another cheap mortgage deal when their fixed-rate term runs out.
So as a result many people ask SellMyHouseBerkshire how do I get 100% market value for my house? Well thats a good question to ask because our service helps many people who want to sell their property fast for the full outstanding mortgage value. So even if your home is in negative equity we can buy it today!
I'm in negative equity - get me out of here!
So, how can you sell your negative equity property for the full value and not lose any money?
If you are in negative equity your property may be referred to as being underwater. We can help you reach the surface and relieve the stress by making you a guaranteed cash offer for your home today.
Even estate agents cant help you sell your house if you are in negative equity, because your bank will not allow you to sell your property for less than the outstanding mortgage amount unless YOU can make up the shortfall and why would you want to do that?
If you are in negative equity, and you dont keep up your mortgage payments you are at risk of your property being repossessed. If this happens and your property is then sold at auction usually for less than your mortgage, then you are still liable for the outstanding amount you owe the bank, which you must pay back even if you are declared bankrupt!
Whatever your situation may be SellMyHouseBerkshire are confident that we can help you today, because we have helped many people just like you sell their negative equity property quickly (for the full mortgage value).

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