Negative Equity Properties: Your Complete Guide

Negative equity became a serious issue across Europe after the 2008 crash. This was particularly prevalent in many areas across Spain, Portugal and Cyprus. Especially in areas where ex-pats were sold second properties at inflated prices. Although it is less common now, many people who bought pre-2008 are still trapped in a negative equity nightmare. We hope this guide gives some insight into what causes negative equity and what to do if you own a negative equity property.

What is negative equity?

Simply, it is when the value of a property is less than the outstanding mortgage balance. For example, your property may currently have a value of €140,000, but the remaining mortgage is €160,000. The difference between the amounts would leave you with €20,000 of negative equity.

Can I sell a negative equity property?

You can sell your property; however, you are responsible for paying the difference between the sale price and the outstanding mortgage, also known as the shortfall. Negative equity also makes it more difficult to find a willing buyer. Negative equity is not an issue until the property is sold. It is a major problem if you are unable to maintain mortgage payments or the interest-only mortgage term is coming to an end. This can leave you ‘trapped’, unable to pay your mortgage and unable to sell.

Is the mortgage balance all I have to pay?

If you have maintained mortgage payments, the mortgage shortfall is all you have to pay. However, if you have missed payments, you will likely have additional fees added by your lender. These can include missed payments, penalties for missed payments and legal fees if the bank has begun legal proceedings.

Will my property always be in negative equity?

Many property owners have not sold under the belief that the value may increase and reduce/eliminate their negative equity. Whilst this is possible, it is unlikely. Property prices mean that if you bought property before 2008, it will likely never return to anywhere near its original price. Covid-19 has also severely affected property prices in these areas.

What if I ‘hand back the keys’?

We encounter lots of clients who have been advised to return the keys to their lender and forget about their property. Unfortunately, this does not work and leaves you open to pursuit in the UK.

What about my other debts (e.g. IBI tax, community fees etc.)?

These debts can also be negotiated down, and we do this for all our clients. This is to ensure that you don’t get any nasty surprises in the future.

Do I need to go to the property?

No, our team will collect the necessary documentation, and our legal team will deal directly with your lender, on your behalf. You don’t need to communicate with the bank, and you don’t need to go to the property.

What are my options?

When it comes to negative equity, the best piece of advice we can give is: do not ignore the issue. The longer you bury your head in the sand, the worse the problem will get. EU Property Solutions have over a decade’s experience in dealing with European lenders. We are here to find a solution to all your issues. We can negotiate with the bank to achieve a sale of the property and write down any shortfall remaining. Our team won’t leave any loose ends so, by the time your case is settled, any outstanding debt is gone. Contact us today on 0371 454 3676 or email us at [email protected] to speak to a member of the team and find out how we can help you.

Have you done this for other people?

EU Property Solutions have been helping people out of negative equity for over a decade. In this time we have helped hundreds of clients and written off millions of Euros of debt. Click here to read about some of our recent successes and watch testimonials from clients we have helped in the past or visit our YouTube channel to see more.