Negative equity: what it means and what you can do about it

What is negative equity?

A property is in negative equity if it’s worth less than the mortgage secured on it, and it’s normally caused by falling property prices.

For example, if you had bought a property for £150,000, with a mortgage for £120,000 and the property is now worth £100,000, you would be in negative equity.

However, if you had bought a property for £150,000 with a mortgage for £120,000 and it’s now worth £130,000, you would not be in negative equity.

It’s estimated that there are around half a million properties in negative equity in the UK, although some areas are affected far more than others.

It’s a particular problem in Northern Ireland, where up to two out of every five properties bought after 2005 are in negative equity.

How do I know if I’m in negative equity?

You might not know whether you’re in negative equity.

First, ring your lender to find out how much you owe now.

Next, ask a local estate agent to value your home or instruct a surveyor (who will charge for this).

If the value of the property is below what you owe, then you are in negative equity.

Problems that come with negative equity

It’s an immediate problem if you want to sell your home.

Unless you have savings that you can use to repay the difference between the value of your home and the mortgage, you might find it difficult to move.

It can also be difficult if you want to re-mortgage, perhaps to a fixed rate or a cheaper deal.

Most lenders will not let people with negative equity switch to a new mortgage deal when their existing one ends.

Instead, they will normally be moved onto the lender’s standard variable rate.


Moving house if you’re in negative equity

How easy it is to move will depend on several factors, such as:

  • how much negative equity you have?
  • the value of the property you want to move to
  • if you are up-to-date with your existing mortgage
  • how much of a deposit you can raise for the new property?

Talk to your lender in the first instance and find out what help they can give you.

A very small number of lenders offer a ‘negative equity mortgage’.

This will let you transfer your negative equity to your new property, but you will still be expected to pay a deposit.

Pros and cons of negative equity mortgages


  • You can move house without having to pay off the negative equity on your mortgage. This is particularly useful if you need to move for work or family reasons and can’t put it off.


  • You might have to pay early repayment charges on your existing mortgage.
  • There might be extra fees and charges, and your new mortgage might have a higher interest rate than your existing one.
  • Very few lenders offer them.
Reducing your negative equity

If possible, it’s a good idea to try and reduce your negative equity by overpaying your mortgage.

Firstly, check whether your existing mortgage will let you make overpayments and, if so, how much you can overpay without incurring an early repayment charge.

Next, work out how much extra you can afford to pay every month or as a one-off.

Look online for a mortgage overpayment calculator.

This will tell you how much difference your extra payments could make.

Several mortgage brokers and lenders have these tools.

Renting out your home if you are in negative equity

Another option might be to rent out your home if your lender will agree to this.

This would mean you keep the existing mortgage, although you will probably have to pay a higher interest rate.

You would also have to tell your insurer.



Massey Divall Financial Services are an appointed representative of The Right Mortgage Limited which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate most buy to let mortgages.

The guidance and /or advice contained within this website is subject to UK regulatory regime and is therefore targeted at consumers based in the UK

Conveyancing isn’t regulated by the Financial Conduct Authority.

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