Can Linking cause “negative equity”?
Negative equity arises when the value of the mortgaged property is less than the mortgage balance. Of itself, Linking cannot cause negative equity because Linking is not the same as borrowing additional funds under the mortgage and so the mortgage balance does not increase merely because a Borrower puts on a Link. However, Linking to an underperforming index will mean that more of each mortgage payment is attributed to interest charges than would otherwise be the case.
