Negative Equity

A situation where your mortgage balance is greater than the value of your home.

This can occur when you make a small down payment (e.g.  5%) and home prices drop considerably.

Negative equity is problematic for people who can’t meet their mortgage payments.  That’s because it eliminates the option of selling ones home to repay the mortgage in full.

 

Source: CanadianMortgageTrends.com