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At a glance: What you can do if your home is worth less than you owe on your mortgage.
Reading time: 2 mins
This summary covers England and Wales
For a version of this summary that covers Scotland, please click here.

What is negative equity?

Negative equity is when the current value of your home is less than the amount you owe on your mortgage. It can be caused by falling property prices, or high borrowing relative to the value of the property.

Negative equity can be a problem if you need to move. There are some things you can do that might help, though there may not be an easy solution.

Ask for help from your lender

Contact your lender and ask about any help they can offer. Some lenders may offer you a package, particularly if you have a good payment record. For example, they might allow you to borrow up to 125% of your home’s value if you move.

Think about renting out your home

If you decide to rent out your home you usually need your lender’s permission. Some lenders increase the mortgage interest rate for allowing you to rent out the property.

Other things to think about if you rent out your home:

  • Check if your buildings and contents insurance will be affected.
  • As you will be getting extra income, check if your tax position will be affected.

Selling your home

If you want to sell your home you need to ask your lender. They can stop a sale if the sale price does not cover the outstanding mortgage.

Your lender may want you to use an approved estate agent for the sale and check any offers you get. Each lender will have different rules

Are there other things I could do?

Depending on your circumstances here are some of the things you can do:

  • You could borrow the amount you need to clear the shortfall from another source, such as a personal loan, savings or from a relative.
  • If you have an endowment mortgage you could check to see if the value of the endowment covers the negative equity. You will need an independent financial adviser to help you with this.
  • If you have spare income, you could increase your payments on an endowment policy or another investment to build up enough to pay off the negative equity.
  • If you have a repayment mortgage you could make extra lump-sum payments that reduce the balance owing.
  • If you want to move because you need more space, look at whether you can build an extension.

Learn more about this topic

If you want to learn more about this topic, you can read our in-depth guide.

Read in-depth-guide

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