Neg­a­tive eq­uity to be kept in per­spec­tive

Bray People - - PROPERTY MOVES -

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!

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