Definitions 
Negative equity occurs when the market value of the property falls below that of the outstanding amount remaining on related mortgage.
Home owners who borrow a large percentage of the value of their property are at a greater risk of going into negative equity. Example: Negative Equity
Let’s assume that a first time buyer receives a $180,000 loan to purchase a property for $200,000. He provides a £20,000 deposit, which is his equity in the property.
A real estate slump then causes the value of the property to fall by 40%, that is down to a value of $120,000. The outstanding amount on the mortgage is now greater than the current market value of the property. He is now in so called negative equity because his equity in the property is -$60,000.
The Consequence of Negative Equity
Home owners in negative equity generally experience great difficulties in moving home. In the example above, the home owner would (in order to move home) need to secure an additional $60,000 to pay off the lender!
