Negative equity
Negative equity
Negative equity occurs when the value of an asset securing a loan dips below the loan balance. For example, an individual could take out a mortgage loan to finance 100 percent of a home purchase. If the home's value subsequently drops, due to recession, for example, the homeowner would have negative equity. Selling the home would require the homeowner to pay out of pocket to cover the difference between the sales price and the loan balance.
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