What is negative equity and what can you do about it? 

Negative equity is when your home’s current market value is lower than the amount you still owe on your mortgage. It’s a situation many homeowners worry about, particularly if house prices fall or they’ve bought with a small deposit. 

While negative equity can make selling, moving or remortgaging more complicated, it doesn’t automatically mean you’re in financial difficulty. In many cases, homeowners continue making their mortgage repayments as normal while they build up equity over time. 

What is negative equity? 

Negative equity happens when your mortgage balance is higher than the value of your home. 

For example: 

• Home value: £220,000 

• Mortgage balance: £240,000 

• Negative equity: £20,000 

In this example, selling the property for £220,000 wouldn’t generate enough money to fully repay the outstanding mortgage. The difference of £20,000 is the negative equity. 

The opposite of negative equity is positive equity, where your property’s value is higher than the remaining mortgage balance. 

How does negative equity happen? 

There are several reasons why a homeowner may end up in negative equity. 

Property prices fall 

One of the most common causes is a drop in local or national house prices. 

If you bought a property during a strong market and values later decline, your home’s value could fall below your mortgage balance, particularly if you’ve only owned the property for a short period. 

Buying with a small deposit 

A smaller deposit means you borrow a larger proportion of the property’s value. 

For example, if you buy with a 5% deposit, even a relatively modest fall in property prices could potentially leave you owing more than the property is worth. 

High loan-to-value mortgages 

Loan-to-value (LTV) measures the size of your mortgage compared with the value of your home. 

The higher the LTV, the smaller the equity cushion available if prices fall. 

Interest-only mortgages 

With an interest-only mortgage, monthly repayments cover the interest but not the original loan amount. 

Unless separate arrangements are made to repay the balance, the mortgage debt remains largely unchanged throughout the term. This can increase the risk of negative equity if property prices fall. 

Borrowing against your home’s value 

Some homeowners borrow additional money against their property, such as through a further advance or secured lending. 

While this can provide access to funds, it can also increase the overall mortgage balance and reduce available equity. 

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

Working out whether you’re in negative equity is usually straightforward. 

Get an up-to-date property valuation 

Start by finding an estimate of your home’s current value. 

An online valuation tool can provide a useful indication, although it’s worth remembering this is only an estimate. You may also choose to arrange an estate agent valuation for a more informed view. Rightmove’s Instant Valuation tool can provide an estimated value and track changes over time. You can also read more about how online valuations work. 

Check what your home’s worth

Check your mortgage balance 

Look at your latest mortgage statement or log in to your lender’s online account. 

You’ll need the outstanding balance, not your original loan amount. 

Calculate your equity 

Subtract your outstanding mortgage balance from your home’s estimated value. 

Property value − mortgage balance = equity 

If the result is a negative figure, you may be in negative equity. 

Keep an eye on changes over time 

House prices and mortgage balances change over time. Reviewing your position periodically can help you understand whether your equity is growing or shrinking. 

Does negative equity hurt your credit score? 

Negative equity doesn’t directly affect your credit score. Your credit score is generally based on factors such as how you manage borrowing, whether you make payments on time, and how much debt you have compared with your available credit. 

Simply owing more on your mortgage than your home is worth won’t usually appear on your credit report or reduce your credit score. However, if negative equity makes it harder to keep up with mortgage repayments and you fall into arrears, this could affect your credit history. That’s why it’s important to remember that negative equity and mortgage arrears are two different things.  

Many homeowners in negative equity continue making their mortgage payments as normal and may see little impact on their day-to-day finances. If you’re concerned about your mortgage payments, it’s worth speaking to your lender as early as possible to understand what support may be available. 

Can you sell a house if you’re in negative equity? 

Yes, it’s possible to sell a home that’s in negative equity, but there can be challenges. 

The main issue is that the sale proceeds may not be enough to repay your mortgage in full. 

For example, if your property sells for £220,000 and your mortgage balance is £240,000, you’ll still need to find £20,000 to clear the mortgage. 

Because lenders usually require the mortgage to be repaid when a property is sold, homeowners often need savings or other funds to cover the shortfall. 

In some circumstances, lenders may discuss alternative options, but this will depend on individual situations and lender policies. 

If you’re considering selling while in negative equity, it’s worth speaking to your lender as early as possible. 

Can you move house if you’re in negative equity? 

Moving home while in negative equity can be more difficult, but it’s not always impossible. 

Some homeowners may be able to port their existing mortgage to a new property. Porting means transferring your current mortgage deal when you move home, subject to lender approval. 

You may also need additional funds to cover any shortfall between your current home’s sale price and mortgage balance. 

Whether moving is realistic will depend on factors including: 

• How much negative equity you have 

• Your income and affordability 

• The value of the property you’re moving to 

• Your lender’s criteria 

If you’re hoping to move, speaking to your lender early can help you understand the options available. 

Can you remortgage if you’re in negative equity? 

Remortgaging can be more challenging when you’re in negative equity because lenders often assess loan-to-value levels when deciding whether to offer a new mortgage. 

If your mortgage is higher than your property’s value, some lenders may be unwilling to offer a new deal. 

When your current mortgage deal ends, your existing lender may offer you a product transfer. This means moving to another deal with the same lender, rather than remortgaging elsewhere. However, lenders don’t always offer products for mortgages at or above 100% loan-to-value, so your options may be limited if you’re in negative equity. Speak to your lender before your current deal ends to find out what may be available and what could happen if you don’t move to a new deal. 

As mortgage products and lender criteria vary, you may also want to speak to a regulated mortgage broker before making a decision. 

How can you get out of negative equity? 

The best approach will depend on your personal circumstances, but there are several ways homeowners may gradually reduce negative equity. 

Make overpayments where possible 

If your mortgage allows it, making overpayments can reduce the balance more quickly. 

Even relatively small additional payments can make a difference over time. Check your mortgage terms or speak to your lender first, as limits and early repayment charges may apply. 

Reduce your mortgage balance 

Continuing your regular repayments helps reduce the amount you owe. 

As the mortgage balance falls, your equity position may improve. 

Wait for house prices to recover 

Property values can rise and fall over time. 

If local house prices increase, the value of your home may eventually exceed your remaining mortgage balance again. 

Improve your home’s value carefully 

Certain home improvements may increase your property’s market value. 

However, not every renovation adds value, so it’s important to consider costs carefully before carrying out major work. 

Stay in the property longer 

For many homeowners, time is one of the most effective ways of reducing negative equity. 

Remaining in the property and continuing mortgage repayments can gradually improve your position. 

Speak to your lender about available options 

If you’re concerned about negative equity, your lender may be able to explain the options and support available based on your circumstances. 

Getting advice early can help you understand what’s realistic before making major decisions. 

Is negative equity always a problem? 

Not necessarily. If you’re planning to stay in your home and can comfortably afford your mortgage repayments, negative equity may have limited day-to-day impact. 

You still own the property and can continue living there as normal. Negative equity tends to become more relevant when you’re planning to: 

• Sell your home 

• Remortgage 

• Move to another property 

• Access additional borrowing 

For many homeowners, affordability and keeping up with repayments remain the most important factors. 

Our mortgage expert, Matt Smith, says: “Finding out you’re in negative equity can feel worrying, particularly if you’re thinking about moving. But it’s important to remember that negative equity and mortgage arrears aren’t the same thing. 

If you’re keeping up with your mortgage payments and can afford them, negative equity often has little impact on day-to-day life. It tends to become more relevant if you’re planning to sell, remortgage or move home. 

If you’re concerned about your position, the best first step is to speak to your lender. The earlier you understand your options, the more choices you’re likely to have available.” 

Does negative equity affect first-time buyers, movers and landlords differently? 

First-time buyers 

First-time buyers who purchased with a smaller deposit (and so a bigger mortgage balance overall) may be more vulnerable to negative equity, especially in the first few years of ownership. 

Home movers 

Homeowners looking to upsize or relocate may find negative equity limits their options, particularly if they need to sell before buying another property. 

Landlords 

Landlords can also experience negative equity if property values fall. This may affect their ability to refinance or expand their portfolio, although the impact will depend on rental income, borrowing arrangements and long-term plans. 

What should I do if I’m worried about negative equity? 

If you’re concerned about your position, follow these steps: 

1. Check your estimated home value. 

2. Check your mortgage balance. 

3. Work out your equity position. 

4. Speak to your lender. 

5. Consider independent financial advice and, if you’re struggling with debt or making your repayments, consider contacting a free debt advice service. 

6. Review whether moving now is the right decision. 

You may also find it helpful to track your home’s estimated value and equity position over time. Rightmove’s Equity Tracker allows homeowners to view their estimated home value, mortgage details and equity in one place. You can access this feature for homes you own by tracking a property in My Rightmove.

FAQs

• What is negative equity in simple terms?

  Negative equity means you owe more on your mortgage than your home is currently worth. For example, if your property is worth £220,000 and your mortgage balance is £240,000, you’d have £20,000 of negative equity. 

• Can I sell my house if I'm in negative equity?

  Selling is possible, but the money raised from the sale may not cover the full mortgage balance. You’ll usually need a way to repay any shortfall. 

• Can I remortgage while in negative equity?

  It can be more difficult because lenders consider loan-to-value when assessing applications. Some borrowers may find their existing lender offers alternative options. 

• Can house prices rising reduce negative equity?

  If your property’s value increases while your mortgage balance falls, your equity position may improve and eventually return to positive equity. 

• How do I calculate whether I'm in negative equity?

  Subtract your outstanding mortgage balance from your home’s current estimated value. A negative result suggests you may be in negative equity. 

• Is negative equity the same as being in mortgage arrears?

  No. Negative equity relates to the relationship between your mortgage balance and your property’s value. Mortgage arrears occur when you’ve fallen behind on repayments. 

• Should I keep paying my mortgage if I'm in negative equity?

  Yes. If you can afford your repayments, continuing to pay your mortgage will help reduce the outstanding balance over time. Missing payments could lead to arrears, affect your credit history and put your home at risk. If you’re struggling financially, contact your lender as soon as possible to discuss available support and consider seeking free debt advice. 

Please note: Rightmove is not authorised to give financial advice; the information and opinions provided in these articles are not intended to be financial advice and should not be relied upon when making financial decisions. Please seek advice from a regulated mortgage adviser.