The negative equity in your home is shrinking

Saturday, August 15, 2009, AM | Leave Comment

What the heck is negative equity? If you have heard of mortgage underwater, then negative equity means almost the same, for us ordinary folks. I don’t know if there is a difference in technical definition.

Let’s say your home is worth $200,000 and you owe $250,000 in mortgage, then you have negative equity of $50,000 and the mortgage is underwater. This situation has happened to millions of people.

More than 15.2 million U.S. mortgages, or 32.2% of all mortgaged properties, were in a negative-equity position on June 30, edging down from 32.5% at the end of March, according to data from First American CoreLogic, which tracks data on about 90% of mortgage loans nationwide.

Negative equity can occur because of a decline in property value, an increase in mortgage debt or a combination of both.

In a Nutshell
In our example, the $50,000 negative equity is shrinking. Though this decrease is good news, it’s by no means an end to the housing market’s problems.

If you have a good job and can prolong living in your home, then the negative equity is only on paper. You lose only when you sell.

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