Negative equity to be kept in perspective
SIMON MURPHY MSCSI is a Director of REA Murphy.
Equity is defined as ‘the value of a mortgaged property after deduction of charges against it’. By definition negative equity is a transitional figure calculated at a particular point in time and consequently what property has negative equity today may well have had positive equity in the past and may well have positive equity in the future. As property prices rise the likelihood of a particular property having positive equity improves, however for the vast majority of households the issue is irrelevant. If one is not selling a property then the equity issue is not really relevant and at times, primarily because of the media coverage, people who may owe more currently on their property than it is currently worth beat themselves up over making a decision to buy at the height of the market. This is particularly unfortunate where the property is a family home and the decision was a lifelong investment which is continually being revisited at a very early stage in the lifelong term. Where a property owner can meet the loan repayments one should revert to the long-term view, the loan will be cleared, you will have full ownership of a valuable asset and the property will have served you well in the intervening period. The likelihood is that at the end of the process your asset will have recovered to a value in line with and perhaps above what you paid for it. The advice is simple, shelve the negative terminology and enjoy your home!