Negative equity occurs when

Negative equity occurs when

• A. The loan balance exceeds the property value.
• B. The property value is greater than the outstanding loan.
• C. The loan balance equals the property value.
• D. The loan balance is less than the property value.

Answer: (A)

Negative equity means you owe more on your mortgage than the home is currently worth. When the outstanding loan balance exceeds the property's market value, you would receive less from a sale than what you still owe, creating a shortfall you’d need to cover. This can happen if property prices fall or if the loan-to-value ratio is very high. For example, owing $300,000 on a home valued at $270,000 puts you in negative equity by $30,000. If the property value rises above the loan, you have positive equity; if they’re equal, you’re at break-even.

Negative equity means you owe more on your mortgage than the home is currently worth. When the outstanding loan balance exceeds the property's market value, you would receive less from a sale than what you still owe, creating a shortfall you’d need to cover. This can happen if property prices fall or if the loan-to-value ratio is very high. For example, owing $300,000 on a home valued at $270,000 puts you in negative equity by $30,000. If the property value rises above the loan, you have positive equity; if they’re equal, you’re at break-even.