No Need to get Negative About Negative Equity
by: MarkeD
Total views: 359
Word Count: 436
The January 2009 figures from the Halifax House Price Index show the value of the average property has fallen nearly £36,000 since its peak in July 2007.
As a result, anyone who bought a home at the end of 2006, with a deposit of 5% or less, is now likely to find they owe more on their mortgage than their home is worth - the definition of negative equity.
But while this may seem like a dire position, it's important not to panic. Sue Anderson, of the Council of Mortgage Lenders (CML), says: "While negative equity might be frustrating, it's not a problem unless you find yourself in payment difficulties or needing to move.
"There are plenty of simple steps you can take to improve your equity position, especially with low interest rates, meaning many more people can afford to overpay their mortgage."
For homeowners who do worry about slipping into negative equity, or for those who think they may already be in it, there are a number of steps to improve the situation…
Step 1
The easiest way to get out of negative equity is to reduce the size of your mortgage. This might sound impossible, but with interest rates falling to record lows, cheaper borrowing costs are on your side. First, shop around and compare mortgage rates to see if you're getting a good deal. Then, if you do remortgage, use any savings you make to overpay your loan.
Step 2
If you're already on a variable rate mortgage, such as a tracker deal, you'll have seen a sharp fall in your monthly repayments since the Bank of England first began to aggressively cut interest rates in October 2008. Someone with a £150,000 mortgage who is not on a fixed-rate deal will have seen monthly repayments fall by around £350 during this time. Consistently using this money to overpay your home loan will not only reduce the amount of capital you owe, but will also reduce the amount you pay in interest each month - meaning more of the money will be used to erode the outstanding debt.
Step 3
Homeowners on interest-only deals should also consider switching to a repayment one. While this will not make a big difference immediately to the amount you owe, it will mean you start to reduce your mortgage, rather than just relying on house price rises to provide you with an equity cushion.
Article Source: http://www.ArticleStreet.com/profile/marked-5204.html
About the Author
Find out more about the steps you can take about negative equity at http://www.confused.com/mortgages
Rating: Not yet rated
Latest articles contributed by "MarkeD"
1: Ten ways to add value to your home2: Protect Your Property
3: Making a mock of Home Information Packs
4: Landlords Can Boost Rental Viewings With These Tips
5: A Guide To Paying For Your Holiday On Plastic
6: Tips On Using Your Credit Card Responsibly
7: The Bourgeoning Popularity Of Pre-Paid Credit Cards
8: Review of Terminator: Salvation
9: The Recession, APD and Fast Trains: Three risks to Scotland's airline industry
10: Spotlight on Heathrow: How the UK's biggest airport is coping with the recession