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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.
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.
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 ...
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".
To use a simplistic example, Company X used a $10 equity or capital base to borrow another $290 and invest the $300 amount in various assets, which have fallen 10% in value to $270. This firm was "leveraged" 30:1 ($300 assets / $10 equity = 30) and now has assets worth $270, liabilities of $290 and equity of negative $20. Such leverage ratios ...
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By Cory Hopkins Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent ...