We've already discussed equity and the benefits of going into a mortgage with a decent sized deposit.

Put simply, equity is the theoretical amount of cash you could walk away with if you sold your house and paid off the mortgage. If the balance outstanding on your mortgage is €200K and the house is worth €250K, then you have €50K in equity.

If you are unfortunate enough to owe more than the house is worth then you would still owe money after selling the house and putting all the proceeds towards the mortgage. If the balance outstanding on your mortgage is €200K but the house is only worth €185K then you have Negative Equity of €15K

Is it really a problem?
Some argue that as long as you can keep paying your mortgage Negative Equity is irrelevant. Eventually you'll pay down the mortgage enough to get you back in positive territory.

They are right of course....unless....

What happens if you actually want to sell the house and move on?
What if you're one of the thousands of people who bought started homes, perhaps a one or two bed apartment.

You might have figured that when the time came to have kids or a super large scalextric set, you could simply sell the starter home and parlay the profits into a house with a room big enough for your race track...or kid.

If you find yourself in Negative equity that plan goes out the window. You simply can't sell the starter home unless you clear
the mortgage.

What can you do?
You're in negative equity. The scalextric track requires the bathroom door to be kept permanently ajar, your first born is more confined than a battery hen. What can you do?

You essentially have three options.

1. Do nothing. Stay where you are, throw as much money as you can at the mortgage, every spare penny trying to buy yourself back into positive equity.

2. If the amount of negative equity is small enough (e.g. a few thousand euro) you may be able to get an unsecured loan for the difference. This might enable you to sell your existing house, but you're unlikely to be able to buy the bigger house you require, you'll have no deposit and an outstanding debt.

In this situation you can rent the larger house for a few years while you work on clearing the debt and building up your savings.

3. You could try renting out the existing starter home, and moving yourself, the kid and the scalextric set into a bigger house that you rent.

If the rent you earn on the starter home covers the mortgage then you are very happy. If it doesn't you will have to make up the difference.

It could be that you have to pay rent on your bigger house plus a portion of the mortgage on the starter home, but you could still be in a better position than living in a house that no longer suits your needs.