My No Leverage Principle- Why? Part 2

My No Leverage Principle- Why? Part 1

I don't like the ideas of getting into Negative Equity. Read on. The Story ...


What is negative equity, and how does it affect a home buyer?

Generally, a home is said to be in “negative equity” when its market price is less than its outstanding loan.

Banks say that as long as customers pay the monthly instalments on time, they won’t ask them to top-up the difference between the market price and the outstanding loan.

However, if payment isn’t made for a few months, and the customer is unable to work out a payment plan with the bank, the bank may get a court order to do a “forced sale” to recover the outstanding loan and unpaid interest.

While it’s less common for HDB flats to be in negative equity, it’s possible for resale flat buyers to find themselves in such a situation, especially if they had bought the flat when prices were at a relatively high level.

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Psychological Losses - Can you stomach it?

If someone looks at his value of his portfolio falling as much as 60-70%, and keeps shaking his head, and feeling so sad and wondering how he gets into this mess?

But, the worst and unlikely scenario that can happen is ZERO EQUITY.

If someone felt so disheartening at falling portfolio value, believe me, the psychological losses of NEGATIVE EQUITY may drive him into depression!