Negative Equity Effects

• Negative equity occurs when the value of a house on the market is lower than the loan principal due on the house. This means that even if the house was sold as a foreclosure, the money received would not cover full loan debt -- even foreclosures are bound by market forces. As a result, an amount of money is leftover. The borrower may have to pay this leftover debt, which can be very difficult for someone already facing a foreclosure. A new loan may be able to help the situation, and there is a variety of sources that the borrower can turn to.