What is home equity? Equity is created when all your debts secured by the property are subtracted from your house value. As long as homeowners make the monthly payments, they see themselves as tenants and do not bother themselves with negative equity. But homeowners that are looking into the future, view negative equity as a curse.

Positive equity cannot be built until the negative equity meets the zero equity thresholds. The only way to get closer to zero equity is dealing with portions of your mortgage payments going towards the principal to reduce the negative equity.

If you plan to sell your house because of negative equity, it will only cost more. You must still pay the entire lien on the property. Otherwise you will not have a good title, and then it will be impossible to find a buyer. You also cannot transfer liens to another property unless you receive permission from the lender, which is also an impossible situation. If you can't sell your house and buy a new one, you can always become a tenant in the area you want and a landlord in the old one.

There can also be negative equity when there is a decline in real estate value. At that point, things are out-of-your-control. Another way to acquire negative equity is if you make no down payment when you move in. At that point, appreciation will not happen.

Lenders expect just as much as borrowers do from appreciation. So in all reality, lenders are not as wise with equity as they should be.

You could always build equity the old fashioned way by paying down your mortgage.

Have an opinion or a question you would like me to answer? Write to me!

http://www.CarlHampton.com 

“Your” Money Matters By Carl Hampton
From the Author of “From Credit Despair To Credit Millionaire”



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