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negative equity


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1. The difference between the value of a property (usually residential) and the outstanding amount borrowed against it where the latter is the greater. For example, if a property’s current market value is £250,000 and the borrowing against it is £260,000, there is a negative equity to the extent of £10,000. Negative equities occur chiefly when economic recession has an adverse effect on property prices. House owners who paid more for their houses than their current market value are unable to sell without realizing the loss. 2. More generally, any asset that has a market value below the sum of money borrowed to purchase it.

1. The difference between the value of a property (usually residential) and the outstanding amount borrowed against it where the latter is the greater. For example, if a property’s current market value is £250,000 and the borrowing against it is £260,000, there is a negative equity to the extent of £10,000. Negative equities occur chiefly when economic recession has an adverse effect on property prices. House owners who paid more for their houses than their current market value are unable to sell without realizing the loss. 2. More generally, any asset that has a market value below the sum of money borrowed to purchase it.

Subjects: Accounting.


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