What is Negative Equity?

The word negative equity is commonly used every time when the market value of a real estate has fallen bellow the price of the actual loan. If this is the case then the loaner can request the creditor even the loan out what he’s currently paying by managing the difference between the loan and the market value.

For example you have purchase a real estate for £200.000, and you have to make a first time deposit of £40.000 now the market slows down so the prices start to decline. If the market value of the house owned drops below £160.000 then the one who has given out the mortgage has to pay you the difference while your still paying the loan which has been preset in the beginning.