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houses that are and are not in negative equity

What Is Negative Equity and How to Deal with It

Negative equity is when you owe more on your property than what it’s valued at. You can deal with it by selling your house and paying the difference, increasing your home’s equity, or waiting it out. Our loans can help you increase your home’s equity or pay off the difference if you choose to sell.

Have you found yourself in the rut of having negative equity? Read on to find out how we can help!

What is Negative Equity?

Buying a home is typically a great investment. In theory, a homeowner will make money from their home because it will appreciate in value. 

Hopefully, a homeowner will sell their home for more than what they paid, or for more money than is still owed on the property.

Home equity is the difference between what is owed on your home and what it is worth.

To find out your home equity, subtract what is owed on your home from your home’s worth. 

Positive equity is when your home equity is above zero. Equity is built by paying off your loans and when your home’s value increases. But if your equity falls, you can end up with negative equity.

Negative equity is when the value of your property is below how much you owe on the property. In other words, you owe more on the home than what it’s worth.

What Causes Negative Equity?

Negative equity can come from many different things. 

One of the main reasons for negative equity is market decline. This is when someone buys a home when the market is at its highest, and then the market significantly drops.

Another reason is if you have a very high-interest loan. You will get a high-interest loan if you are considered a high-risk borrower. If your loan has high interest, most of your monthly payment will go towards paying off the interest rather than the loan itself.

The larger your down payment is, the more equity you will have in your home. If you could only make a small down payment, that can open the risk for negative equity.

What Happens When you are in Negative Equity?

If you sell your home for less than what you owe on the home, you will have to pay your lender the difference on your own.

How do you Deal with Negative Equity?

One thing to do is wait it out. If the market drops, it will likely go back up eventually. You just have to decide how long you’re willing to wait it out before selling your home.

Another thing you can do is make extra payments. When you make extra payments, you can make them directly to the principal balance. This will lower your debt and increase your equity. 

A third thing you can do is rent out your home until the market is better to sell or until you have positive equity. You can either rent out a room or move into a more affordable place and rent your entire home.

You can also raise the value of your home to increase your equity. You can do this by adding a patio, replacing heating, and cooling units, upgrading old appliances, and so forth.

family having dinner outside

What are Some Loans I can Get to Help Me?

Simple Fast Loans offer many different loan types that can help you if you have negative equity. You can put these loans towards upgrading your house, making extra payments, or paying off the difference if you sell your home.

Installment Loans

With Simple Fast Loans, the installment loan process is incredibly fast, so you get money in your pocket right when you need it. With flexible repayment periods and you will receive an instant decision.

The amount of your installment loan depends on your income and your ability to repay it. The maximum amount varies per state.

You just need to fill out an online application and you will get an instant decision. You will need information from a photo ID as well as your routing and account number.

You don’t have to have perfect credit to get a direct installment loan. We will work with you to help you get a credit option that fits your situation. For more information on Installment Loans visit the Installment Loans Page.

Registration Loans

Registration loans are when you use your vehicle registration as collateral to get a loan. You don’t need to own your car in order to get a registration loan. 

There are easy repayment periods, you get to keep your car, you don’t need a vehicle inspection, and there are no early payment penalties.

To qualify for a registration loan, you need a driver’s license, a vehicle registration in your name, and a checking account where most of your income gets deposited.

Usually, loan decisions are made instantly. Sometimes we might need you to verify extra information.

There aren’t many hoops to jump through when it comes to Simple Fast Loans. All you need is your driver’s license or photo ID, a vehicle registration in your name, a checking account, a phone number, and a social security number. For more information on Registration Loans visit the Registration Loans Page.

Line of Credit

A line of credit is great if you need cash for an emergency or major purchase. It is similar to a credit card or flex loan and is customized for your situation. You borrow what you need up until your credit limit.

The benefits of a line of credit include drawing funds up to your credit limit, having flexibility with cash advances, and having a quick, simple application process!

A line of credit gives you money whenever you need it. You can draw on your line of credit up to your credit limit for a certain period of time and you only pay interest when you borrow. 

Once you pay back the funds that you borrowed, you’re able to draw against it again.

With such a flexible borrowing option, you’re able to choose when you want to borrow and when you want to pay it back if you follow the terms and make the minimum payments.

There isn’t a limit to the number of withdrawals you can make on your line of credit, as long as it’s below your credit limit.

Most people set up automatic payments to pay the minimum amount, but it’s easy to use your account to make extra payments or pay in full without any extra costs. We also send you reminders.

Lines of credit run on a monthly due date and statement cycle. The first statement date is about half a month after you open your line of credit, and the first statement is due about 20 days after. 

We’re always improving our line of credit system to make payments more flexible! For more information on Lines of Credit visit the Lines of Credit Page.

What Can I do with These Loans to Help my Negative Equity?

There are many things you can do with our loans to help your negative equity!

One thing you can do is use the money to pay the difference between what you owe and what you sell your house for. If you have almost enough cash to pay off your mortgage but not quite enough, our loans can help put you over the edge so that you’re able to sell your house!

Another thing you can do with our loans is upgrade your house to improve its value. You can update your kitchen or bathroom, add a deck, add a patio, build an extension, get a new driveway, build a new porch, and more.

Lastly, you can use our loans to make extra payments towards your mortgage.

Final Thoughts

Negative equity may seem scary, but there are a lot of things you can do to help your situation.

With the help of a loan, you can either minimize your negative equity or get rid of it altogether! Whether you get an installment loan, registration loan, or line of credit, Simple Fast Loans can help you deal with your negative equity.

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