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What is Negative Equity?

Sep 11, 2012
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Also known as being "upside down," negative equity is the difference between the value of an asset and the outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former. For example, if your car is worth $10,000 and you owe $15,000 on it, you would have a negative equity of $5,000. Negative equity can result from a decline in the value of an asset after it is purchased.

Some areas decline in value. In other areas, prices may remain flat so that the properties in that area do not appreciate. If a seller wants to sell within 2-3 years of purchasing their property, or is in a declining market, they may be in a situation where they have negative equity.  In 2007 to 2008 most areas in the country experienced extreme price drops.  Nationally (depending on the area) it is estimated that anywhere from 20% to over 50% of homes are "upside down!"

Read 1929 times Last modified on Wednesday, 26 September 2012 18:25
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