Imagine you are a homeowner in negative equity.

If your house is currently valued at $400,000, what is your debt to the bank?

your soul.

A "soul" is supposedly the spiritual part of an person that survives bodily death. Banks may be able to take all your worldly possessions, but I don't think they can take your soul!

$360,000

This is incorrect. If the market value of your home is $400,000, and you owe the bank $360,000, then you have a "(positive) equity" of $40,000.

$400,000

This is incorrect. If your house is worth $400,000, and you owe the bank $400,000, then the equity in your home is $0. However, you are not in negative equity either - unless of course the value of your home decreases!

This is incorrect. If your house is worth $400,000, and you owe the bank nothing, your equity in the property is $400,000 - a very good situation to be in!

$440,000

This is correct. Stella says: "negative equity is when you owe your bank more than your house is worth". "Equity" is the market value of a property minus any mortgage or money owing on the property. For example, if the market value of your home is $400,000, and you owe the bank $225,000, then the "equity" in the house is $175,000. "Negative equity" is the opposite to "(positive) equity". If you are in negative equity (and your house is valued at $400,000), you owe the bank MORE than $400,000. Therefore, $440,000 is the only possible choice here.

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