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CMCC Financial Solutions
The most important thing is to ensure that you continue to make your monthly repayments.
NEGATIVE EQUITY; WHAT DOES IT MEAN FOR YOU? by Conor Carey
Negative equity is a term that’s positively guaranteed to strike terror into the heart of many an Irish homeowner. With so much of people’s hopes, dreams and financial security locked into the value of their homes, it’s perfectly understandable that people get the jitters when the term is mentioned. But what exactly is negative equity, what does it mean for homeowners and what can be done about it?
Conor Carey
Basically, you are in negative equity if the value of your house is worth less than the outstanding balance of your mortgage. If you purchased a property at the height of the market in 2007 with a mortgage greater than 70% of the value then there’s a good chance that you are in or near negative equity. If you’re not looking to move house or raise money secured against your home and you can continue to make your monthly repayments negative equity probably won’t affect you in the shortterm. There are also things you can do now to help ensure that negative equity doesn’t affect your future financial freedom and security. The most important thing is to ensure that you continue to make your monthly repayments. If you are on an interestonly mortgage your repayments will have no effect on reducing the capital you owe on your property.
CMCC newsletter Autumn 2010 Dublin.indd 4
So, as property values fall, your level of negative equity rises. Talk to us today to discuss the possibility and financial practicalities of switching to a capital and interest mortgage. By starting to repay part of the capital owing you will narrow the gap between your home’s value and the outstanding balance of your mortgage. It is vitally important that you have life assurance or mortgage protection in place to pay off any outstanding loan balance in the event of death. The cost of life assurance has decreased over the past couple of years, and so it is also important to review your life cover on an annual basis. Finally, our monthly mortgage repayments and mortgage protection/ life assurance payments are all funded from our earned income. While it is a requirement in Ireland to protect your mortgage repayments in the event of death, it is not a requirement to protect your income in the event of accident, illness or disability. If your income were to cease suddenly due to accident, illness or disability, the reality is that you would no longer be able to meet your mortgage repayments. Income protection is a vital part of any sound financial plan.
08/09/2010 17:20