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Negative equity is a deficit of owner's equity, occurring when the value of an asset used to secure a loan is less than the outstanding balance on the loan. [1] In the United States, assets (particularly real estate, whose loans are mortgages) with negative equity are often referred to as being "underwater", and loans and borrowers with negative equity are said to be "upside down".
For example, let’s say that your current mortgage loan balance is $360,000. But your home is only worth $300,000. In that case, you would have negative equity of $60,000.
It’s also known as having negative equity. For example, say Jane bought her home for $300,000, made a $30,000 down payment and borrowed $270,000. ... During the 2007-8 subprime mortgage crisis ...
More Americans find themselves in a position of negative equity -- owing more on a mortgage than the home is currently worth. By itself, negative equity isn't necessarily trouble. Those who can ...
[73] [74] This major and unexpected decline in house prices means that many borrowers have zero or negative equity in their homes, meaning their homes were worth less than their mortgages. As of March 2008, an estimated 8.8 million borrowers – 10.8% of all homeowners – had negative equity in their homes, a number that is believed to have ...
A strategic default is the decision by a borrower to stop making payments (i.e., to default) on a debt, despite having the financial ability to make the payments.. This is particularly associated with residential and commercial mortgages, in which case it usually occurs after a substantial drop in the house's price such that the debt owed is (considerably) greater than the value of the ...
For example, if you had an outstanding loan balance of $250,000 and your home appraised for $235,000, you’d have negative equity. It’s not a great state to be in.
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