Negative equity is when the market value of your property falls below the current value of your mortgage and other loans that have been secured against your property. This was not a problem up until the housing market crashed in the United States in 2007. This created a ripple effect around the world, and now many people in the United Kingdom are facing having homes with negative equity with thousands more looking at being in negative equity in the near future. When this situation happens and you try to sell your home, you may not get enough of it to pay off the mortgage.

Loan to Value - or LTV - is the proportion of the market value of a property that you borrow with your mortgage loan. The higher this value is the more equity you lose when the markets fall, leaving many homeowners with negative equity on their homes. This makes it difficult for them to remortgage their homes, and with lenders hesitant about making loans to people, residents of the United Kingdom are literally stuck. When added to that fact that many people are having problems paying their debt because of the world crisis, they are basically stuck in their home until it is repossessed because they can't pay the mortgage or get a loan to help them out.

Negative equity tends to be an issue if you are selling your property. Those borrowers who cannot afford to remortgage their homes at the end of their current deal find themselves being forced into a standard variable rate (SVR) plan , and that is actually turning out to be a good thing for many homeowners. Right now the SVR is sitting between 4.5% and 6%, an affordable if not competitive rate. Homeowners are urged to look through the market for better deals in order to have one in place before their current mortgage expires, with ever decreasing Bank of England Base Rates.

Obviously many people can meet their mortgage repayments without a problem, and if they are not looking at moving any time soon negative equity no longer becomes a problem. It may take until sometime in 2010 for the house market to recover, and until then you can take advantage of the low interest rates to make home repairs that will help boost the capital repayments and recovery when the housing market stabilises. Of course this is only applicable if you do not have any unforeseen issues like illness, redundancy or accidents and you can keep up your repayments.

Unless you are struggling to the point where you have no choice but to let your home go, it is best to ride out the current negative equity crisis as best as you can. There are many ways of finding alternative money to use towards your mortgage payments to keep up with it, and if you can stay in your home negative equity will not hurt you. You will still be able to secure loans and other financing because you own your home, but if you can avoid selling it until the market stabilises, you will be better off.