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Negative equity

Negative equity Definition

Negative equity is a term used in the housing market, usually following a general fall in property prices, to mean that the market value of a mortgaged house or flat is less than the amount outstanding on the loan used to purchase it. This situation also occurs with 2nd mortgage home equity loans and some loans structured to loan more than the appraised value, such as 125% loans. This means that if the borrower subsequently defaults on the loan, repossession and sale of the property by the lender will not raise enough cash to repay the amount outstanding, and the borrower will both have lost the property and still be in debt.





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