Everything You Need to Know About Low or Negative Home Equity
Everything You Need to Know About Low or Negative Home Equity
Purchasing a home in Milwaukee can be a great investment. Ideally, you as a homeowner will make money when the house increases in value through time. The goal is to get more money out of the home sale later on than what was originally paid. Knowing the difference between what is owed on the home and what it is now worth is called home equity.
We will go over everything you need to know about home equity and what it means when you have low or negative equity.
How to Calculate Home Equity
It is beneficial to know how to calculate a home’s equity. All you have to do is subtract what you owe on your home loan from what your home is worth. If that number is more than zero, you have positive equity. If that number dips below zero, you have negative equity. This is typically known as an underwater mortgage, which means that you owe more money on your home than it’s worth.
Even though negative equity isn’t always preventable, it is important to understand why it has happened and what solutions there are to help get you out of the situation quickly.
Causes of Negative Equity
Negative equity can happen because of several different factors. Some are in your control and some are not. Here are a few causes of negative equity to be aware of.
1. Market Decline
This is one of the most common reasons why homeowners may have a negative home equity. If you purchase a home when the market is at its peak, you may find that you owe more on your house than it’s worth later on if the market drops dramatically.
2. Small Down Payment
The more money you are able to put down on your home upfront, the better. If you take out a loan with no money down and the market drops soon after, you may already have negative equity. This is why it is so important to take some time saving up for a larger down payment before you decide to purchase a new home.
3. High-Interest Loans
If you have a high-interest rate on your loan, most of your monthly payments will end up going toward interest instead of paying down the loan. This can quickly cause you to have negative equity on your home if you’re not able to keep up on the high payments.
4. Home in Poor Condition
The condition of your home can affect its value. If it is rundown and old, its value will decline. If you are able, be sure to make any necessary repairs or updates and keep the home well-maintained. This will help avoid problems later down the road that can end up being very expensive.
What to Do When You Have Low or Negative Equity
You may be panicking if you have low equity in your home. What can you do if you’re caught in this situation? The best way to build your equity is to continually work on lowering your loan balance each month. Another way is to focus on increasing the value of your home by making repairs and updates. However, we do realize that this may not always be possible.
After Peter got things set up and I work with Baeza and she was very open to my problems or issues and took care of those almost immediately things were taken care of as we got closer to closing there was some unusual things happening and she settled that out and it didn't cost me anything out of the pocket just like they said. She definitely has the knowledge and understanding of what's going on with the program and how it works and how to reply to different real estate agents.
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From the first call this company was caring, respectful, and fair. Everyone I dealt with was helpful and pleasant. Shared ideas to bring my 70 yr old childhood home back to its “glory days”! It was difficult for me to make this move, but knowing my home was in good hands made it easier! I recommend them 100%!
Thank you. I really enjoyed working with you. The entire process went even smoother than I could have imagined. Everyone I had contact with was extremely helpful.I would definitely recommend your services to people in similar situations.
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The whole process of the sale of our house was handled very professionaly. My anxiety was taken care of by their professional ethics and attention to my needs and concerns. Thank you once again...
I loved my experience with this company. They offered me a fair price and Beza was there for any questions or help I needed. The process was fast and trouble free. I would recommend this company for selling your home quickly and hassle free.
I don't normally do reviews, but I thought I would as another way to show my appreciation. I feel that I really did get a fair deal for my house sale. I had a lot of different things affecting my situation which caused some holdups and indecision on my end. Peter was great, always understanding and never pushy about anything. Even when I almost backed out very close to closing. The few times they had to come through the house for inspection we're quick and professional. I truly recommend this group if you find yourself wanting to sell your house quickly and painlessly. In my experience they are good people and they do their job well.Kevin Laufenberg
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It was very enjoyable working with this company . They are very understanding . Hard working and move as fast as you want them too. I would definitely use this company again. Thank you very much Ben have a great day!!
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