Negative home equity — when the value of your home is lower than the amount you still owe on the loan –is becoming more and more common all across the country. Especially if you purchased your home in the past few years, you may find that you are in this situation.

Many people who thought they were “safe” from the mortgage crunch, because they thought it was mostly about foreclosures, have found that they are experiencing negative equity. Nationally the average value of a home is 5.5% less than it was a year ago; in some areas, it’s a lot lower than that.

The problem with the newer loan, and the equity situation, is that you’re paying more while your asset — the house — is depreciating. Imagine for example you have an adjustable rate mortgage. At the end of your first adjustment period, your payment goes up. The amount you owe is really the same after the adjustment, but because of the higher payment you feel that the situation is overwhelming. You owe more on your home than you can sell it for.

 Is selling your house the answer?

If you owe more money on your home than you will get in a sale, probably not. You would have to pay cash just to pay off the loan. And will you necessarily be able to get a good rate on the next purchase? Not necessarily. Instead, consider improving your credit and your financial status by investing or paying off other debts. When the market improves, and it will, you’ll be in an even better position to sell your house for a profit.