Negative equity

You are said to be in negative equity when you buy something for a lot more than it's worth.

The term is used to describe those homeowners who have taken out a mortgage on their house which then decreases in value.

An example of this would be buying a house for £200,000 and taking out a mortgage on the property for this amount, only for the house value to drop to £150,000 a couple of years later.

If the homeowner wanted to move, they would be forced to sell at a loss or stay put and pay off their mortgage bills.