Negative Equity Trap
For many home owners the Negative Equity Trap became a very real nightmare in the early 1990s. After the staggering rise of house prices in the late 80s everyone was sure that they would continue to rise.However, in the early 1990s recession hit the UK and the house prices begain to tumble, and thats when many people found themselves trapped by negative equity.
Essentially this is the situation where the value of your house is worth less than your mortgage, so even if you were to sell your house you would still end up owing the bank.
Negative equity comes about as a result of two main things, the first is a high level of debt on an asset, for example if you only put down a 10% deposit on your house it means you own 90%. The second is a massive drop in the price of your house.
So what can you do if you find yourself in negative equity? Well there are a number of options available, but the best one tends to be to try and ride it out, hold onto your house if you can.