In today’s episode Karen asks the question of what to do about her home that has a loan higher than the appraised value. I’ll share some thoughts on what and how she can deal with it.
Having negative equity is like walking on a treadmill with an injured knee. You don’t get very far, and it’s painful.
If you’re lucky enough to be financially solvent, that puts you in the enviable position of being able to make the house payments, even though it feels like you’re throwing hard-earned money into a black hole
Unfortunately, there really is no magical solution for this. The basic options available are relatively straightforward and negative equity in real estate can be a real burden. This is really a time to keep your head screwed on straight and think rationally through the options. Otherwise you can get yourself in bigger financial vortex.
It comes down to wants versus needs to me. The most successful people are the ones who keep overhead to a minimum. Debt always enslaves the borrower. And greed always kills both the lender and the borrower!
This all comes down to your personal situation. If you can afford to stay in the home. You might see a recovery of the real estate market. As most of the markets across the US have seen high increases in appreciation over the last few years. Builders are building again and home buying loans are still considerably low.
The question is can you survive the market recovery long enough to then have more choices in the future.
I have seen too many people feel just because there home has negative equity they have to do something about it. I say, not always true. Think about this for a minute. What is equity anyway. Is it more emotional… or more transactional?
How many people do you know who go out buy a brand new car, then drive it off the lot and 15 mins later driving it off the lot to be completely upside down in your loan and have negative equity in the car, boat or whatever.
So you see it’s clearly an emotional decision as much as it is a financial one.
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