House prices have been dropping rapidly and many people who own their houses are starting to feel the effects of negative equity. Negative equity means that that property is valued at less than what is owed on the mortgage.

For some people this is an issues and for others it isn't. That's because negative equity only really matters when you want to sell the property. As long as you are able to continue to repay the mortgage there isn't a problem.

If you are going through bankruptcy and you let the property go back to the mortgage providers the negative equity would be included in your bankruptcy as it is an unsecured debt (a debt that can't be realised by the sale of property).

If you live in the property you may be able to wait until property prices increase again.

Unfortunately in times of economic downturn there may be a shrinking of the household income which increases the possibility of bankruptcy and house repossession.

Also if there is a change in the mortgage or the mortgage is coming to an end there may be a shortfall which the owner has to deal with however, many mortgage companies will be sympathetic to these changing circumstances.

An option may be to let out the house covering the mortgage costs and rent a smaller and more affordable property.

Therefore there are a number of different options available to you if your property is in negative equity and there is often no right and wrong way to deal with this situation.

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Debt Advisory Line is an introducer of Financial Advisory Line who are an appointed representative of Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited. They are authorised and regulated by the Financial Services Authority.

Your home may be repossessed if you do not keep up repayments on your mortgage.