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Negative Equity Explained
Your Bridge Out of Negative Equity
Negative equity occurs when the market value of a property falls below the outstanding balance of the mortgage secured against it. In practical terms, it means the homeowner owes more to the lender than the property is currently worth.
For example, if a property is valued at £150,000 but the mortgage balance is £170,000, the owner is in £20,000 negative equity.
This situation typically arises when property values decline or when a high loan-to-value (LTV) mortgage was originally taken out. It becomes particularly relevant when the homeowner wishes to sell or remortgage, as the sale proceeds would not be sufficient to fully repay the lender without the borrower contributing additional funds.