When a situation arises, that the market value of the owner occupier's property falls below what his mortgage is, it is a negative equity situation.
By making it possible in the first place to purchase the house because of easy loans, many have gone ahead and bought. They were happy, because the property was rising in value, and it was even possible to keep borrowing more money against it.
Naturally, business was booming, money was being spent on all sorts of things like cars, televisions, holidays, etc.
A general sense of well- being and confidence emerged. All governments love this kind of state of affairs, and everybody is happy.
When things begin to change dramatically, it brings problems of huge proportions. It likes to be seen by many, as a general problem rather than a personal one.
Negative equity, one of the boom and bust economy consequences, is bad news
as it can also lead to many other problems. The feel good factor is gone, and worry sets in. Less money on the table means fewer goods are purchased, which calls for less demand to produce them, thus less jobs. Many mortgage payments are not being kept up, and repossession dangers come into the equation.
All this can lead to other far reaching repercussions, which in turn can have an effect on many who are not even in the negative equity trap.
There are a number of people, who believe that the shortage of money factor does not always lie in the inequality of opportunity, but often in the inequality of performance. They believe, it is vital to raise the output of personal effort to make ends meet, rather than making it a problem which everybody else must automatically pay for, apart from some cases, where hardship will set in, come what may.
While the remarkable ease to obtain credit was promoting plenty of business and everything was buzzing, it also sucked in an army of people who were not really ready to take on the responsibilities in paying back money borrowed.
Negative equity can lead to social troubles. Also, whenever personal debt starts growing with no visible way out, it causes the problem of loss of consumer confidence.
Recently tax payers have been forced to pay towards the propping up of one financial institution already, and who is to say there will not be repeat performances.
The signs are, it will be more difficult to borrow money, even for worthy customers. Businesses will find it harder to get the credit they need, and all sorts of difficulties will follow.
The irresponsible lending which caused so called happiness, will now result in pain to lender and borrower.
Now let us look at things with less gloom. Firstly, there is the group of people who bought their houses at prices which were relatively low, assuming of course that they have not been topping up their mortgage loans on the strength of the rising prices of property. They would have some way to go before getting into a negative equity territory just yet.
Then there is the other group who bought their houses at an already spiralled upwards price, and are in a more dangerous position.
It is to be noted, that albeit repossession is of course a threat if payments are not kept up, and that some companies start getting worried even after a couple of months of arrears. They can take action by going to the County Court to get a possession action so that they can sell the house and recover their money. Of course there is normally a period of writing and offer making, and solicitors start writing etc., which extends the time before anything does happen.
Most of all this can be avoided, if proper action is taken early. There are a number of expert companies which handle these situations remarkably well. You can argue on terms with the mortgage companies for a start. There are ways how you can rent back your own home, in other words remain in your home as a tenant, and various other ways to pursue.
It is always prudent to be prepared to meet problems or find a way to get out of their way. It may be better to get a smaller house or a flat while there is time. It may be better to sell and move abroad while there is time. Every individual has different problems and possibilities.
There are some very helpful estate agents both here and abroad with nice deals on their books which might be good to consider. To get foreign money, there are some really good foreign currency exchange companies who will give better rates of exchange than most high street banks should one wish to sell and buy abroad.
By being prudent in the future, by extra hard work and looking for the best bargains, things will in due course get sorted out. They will not get sorted out by borrowing to get out of trouble, without a clear reason and plan how to pay it all back.
This formula is especially important when dealing with the foreign currency exchange and real estate business. There comes a time when it is prudent to buy and when it is prudent to sell. There is not much point in making a deal to fly on a wing and a prayer.
It takes lots of patience and courage to focus on a good proposition and back it with money. The key is to start with the odds in your favour. For instance many Brits for whom the property has risen to unbelievable heights are coming to a conclusion that there is a fresh opportunity to make money on the horizon
Sell your property high in Britain while you can, and buy property low in USA while you can.
On the face of it, there certainly seems a lot going in their favour. Not only is property in America offered at mouth watering prices, but you get over two dollars for one pound which makes it a win double. Add to this, the possibility that in due course the situation could turn seeing the property prices go down in the U.K and rise in the USA., you could see a real ball game!
If you are one of those people who are thinking of buying a property in America, of course having the odds in your favour is not just in buying a property right, equally important in buying your foreign currency at the best rates. The price of purchasing your dollars makes the price of the property that much cheaper.
Many people already know that the high street banks do not offer as good foreign currency rates as nearly all foreign currency exchange companies do. Some buyers still have to find that out for themselves and the easiest way is to phone around and secure the best foreign currency rate on offer. Remember you are buying money, not a car or boat or a gold watch. You are not getting something which is nicer or faster, lighter or heavier. You are buying money, so get it at the best price you can! There are many foreign currency exchange companies ready to help and give free quotes. Some may be cheaper than others, so it is up to you to find the best deal to suit you. That is the correct way in any business.
Getting the odds in your favour also means selecting a real estate company that you feel comfortable with, meaning one that has the suitable people to explain the many things you have to know before and after you buy. But then, U.S. realtors are well known to be very helpful and friendly and before you know it, you would all be on first name terms.
Talking about friendly and helpful people, they do not come any better than the ones running the foreign currency exchange companies. Straight away you will feel you are not a number but a person who is important to them.
Finally, it is well to note that good luck has nothing to do with good odds. You generally make your own luck by making the right decisions as far as getting the odds in your favour. Bad luck is slipping on a banana skin, whilst good luck is in avoiding to step on it in the first place. So when you see a good opportunity, go for it when the odds are in your favour, bearing in mind that one of the ways in keeping them there, is watching out for even the minor negative things along the way. Everything counts.
Recognizing a good opportunity and seizing it but keeping the odds in your favour. Time may be right to buy property in USA and sell in Britain. Sell high in England buy low in USA. With rates still at over two dollars to the pound this looks attractive to the Brits. One day the market could turn the other way round giving fantastic opportunity to make huge profit.
The Price of the Property is One Thing, The Cost is Another Thing
Buying a property abroad means paying for it in local currency. The actual cost of that currency is dependent on the exchange rate you manage to obtain.
For a start, it is important to note that the foreign currency exchange companies offer better rates of exchange than the High street banks, and that most of them will not charge for the outward electronic transfer cost, whereas the banks certainly will make a charge for electronic transfers and fees.
A possible assumption that it is as well to stay with the bank where one is known rather than deal with a company where one is not known, can turn out to be costly.
The extent of the saving in getting a better rate of exchange from the foreign currency exchange firms can often make a difference of several thousands.
By bothering to make a few phone calls to the various foreign currency exchange offices, one can select the best currency rate deal offer. It will not take too long to find the most attractive quote.
Because the currency rates are constantly changing up or down, you have to look at the live rates which are readily available to check on the internet. By making a comparison between the live rates and the currency rates you are quoted, you will be able to determine the percentage that is being charged.
Many people, especially those who are retired and therefore not tied to a job, will come to the conclusion, that the time has come to take a closer look at the prices of houses in the UK. and wonder if indeed what looks likely to happen will indeed happen, namely that the market will start really easing. Coupled with the fact that the strength of the pound may also deteriorate further in due course, it may look prudent to sell and buy abroad.
This would then generate an increased number of people looking for foreign currency, in order to be ready to acquire their new house in whatever country they may find suitable.
This time, the buyers would not seek the sun as the chief attraction, but look for the ideal financial proposition as the main key. In such a case, value in securing the best currency exchange rates must come seriously into the calculation.
It is never easy to predict what will really happen. The important thing is to figure out the probabilities, and be ready to act in time.
When great changes look to be on the horizon, it is wise to plan how best to deal with them well ahead.
To get all the information on international money movements and currency exchange rates is easy. Just phone any of the various foreign currency companies listed on the internet, and they will be glad to explain everything in detail without any obligation.
The road to keeping the money one has made is full of dangerous obstacles. Being ahead of the curve is to be prudent, which means staying well informed and ready to make the next move without losing too much valuable time.
Buying French wine in London requires payment in pounds not euros, since the British shopkeeper wants to be paid in pounds. Likewise, the French producer will require his money in local currency, namely euros. Along the road of this transaction, the importer would have had to arrange a foreign currency exchange operation.
The rate of currency depends on a number of factors, and will naturally have an influence on the price of the goods that will be imported or exported.
For an immediate exchange of currencies the spot rates market is used, and about half of the transactions are dealt with in this way.
The forward market takes a close second place, while futures and options account for only a smaller part of the currency market.
Thus, a Brit buying a holiday home in Florida will have to pay in dollars for this product (the house), and get an income from it also in dollars should he be letting it. If he wishes to sell it, he will get paid in dollars.
When rather than if, the value of sterling starts to depreciate, this can become an interesting proposition. Naturally even more so for those who purchase an American house now, as the prices are attractive and the value of sterling is still relatively on the high side.
Who can say that the value of the dollar will not appreciate in due course versus the pound? Taking the possibility of the pound depreciating and the dollar appreciating, the double impact of such a situation could be a stunning opportunity to think about.
Taking into account the rate of the two currencies and USA property prices being so attractive, there is an aroma of a mighty tasty proposition in the air. Waiting forever to secure even better chances could start looking dangerous. Things could get a little worse yet, but then, by being too greedy it is possible to miss the bus to good profits.
Is this not the time to start looking for some propositions the US realtors might have in store, and checking with the various foreign currency exchange companies who can quote you the lowest foreign currency exchange rates? Remember getting the best foreign currency rates goes a long way in counting the final cost of the house.
Being ready to spring into action when the situation demands it, is being prudent.
It is no secret that money makes money, anymore than it is no secret that you have to speculate to accumulate.
It is prudent being ready at the right time and place. It is important to know to whom to go for the best real estate deals, and with whom one can get the best rates of exchange regarding the foreign currency one needs.