Negative Equity Mortgages

What is a Negative Equity Mortgage?
A negative equity mortgage is suitable for borrowers with a negative equity. Negative equity arises when the debt outstanding on the mortgage increases to a level above the value of the property, or more commonly where the value of the property falls below the amount owed on the mortgage.

Negative equity is a major problem for both borrower and lender. The borrower is stuck with a debt then cannot be repaid by selling the property, whilst the lender has a much greater likelihood of loss and may be forced to make accounting provisions which may flatten lending activity.

Some lenders offer schemes to deal with this problem. For example young house owners with negative equity could group together with their parents who may have substantial equity and combine resources by consolidating securities for their respective homes.