Investor Glossary-negative equityInvestor Glossary-negative equityInvestor Glossary-negative equityInvestor Glossary-negative equityInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Negative Equity

The HTML to link to this page
 

In real estate, negative equity describes a situation where the debt on real property exceeds the assumed value of the property. With negative equity, the proceeds of a sale may not satisfy the mortgage. Negative equity thus increases the probability of borrower default. Historically, the most common cause of negative equity was a decline in property values. Excessive borrowing is another independent cause of negative equity. Some loan products are dangerous for the borrower by potentially facilitating negative equity. For example, a negative amortization mortgage may allow for monthly payments that do not even cover the interest on the principal, with the difference being capitalized, or added to the principal balance. If equity is already zero, the increase in principal creates negative equity. In practice, many banks will notify the borrower once the loan balance exceeds 110% of the original appraised value of the property, but by then negative equity may or may not exist.



Rate this negative equity definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: real GDP, per diem, APR, open position, ex-dividend date, current ratio, VIX, Zero Cost Collar, reverse mortgage, option premium, LIBOR, 1031 exchange, risk management, phantom income, cancelled check, FICO score, command economy, wholly-owned subsidiary, dividends payable, EBITDA, stock market close, balance sheet, deferred revenue, minority interest, irrevocable trust, deferred tax, required rate of return, 144a, FTSE, in escrow, limit order, stock split, implied volatility, debt service coverage, annual return, labor relations, quality assurance, ex-dividend, average price per share, inflation, 401a, 1035 exchange, class C shares, diluted share, margin rate, Key Rate Duration, retained earnings, liquidity ratio, covered put


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use