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Negative equity refers to outstanding mortgages higher than the property’s value. About half a million UK properties are affected by negative equity. Many homeowners don’t even realize that they are or will be in negative equity.

Is it possible to reduce one’s negative equity, though? In this post, your trusted online conveyancing calculator covers what you need to know about negative equity and how it can affect your mortgage:

The Covid-19 Effect

The pandemic that began in 2020 has significantly affected the industry of buying and selling property. So if you are in the process of selling or buying a home, you should expect delays not only in finding a home or a buyer for your home but also when it comes to exchanging contracts and completing the sale.

There are a lot of sales and even house moves that were put on hold not only in 2020 but even up to now. Because of that, the prices of homes in the UK have been fluctuating. It has also caused many lenders to reduce their mortgage products or alter them because of this economic downturn.

What Negative Equity Means

The equity you own in your property will be the difference between its current value and the outstanding mortgage. For instance, if you purchased a home worth £250,000 and your deposit is £25,000, you will have 10% equity in your property.

Most homeowners hope that as time passes, their homes will increase in value as they pay off their mortgage so their equity value will also increase. However, if the prices fall, there’s a possibility of a negative equity. If one’s outstanding mortgage has become higher than the value of the property, they’re in negative equity. This can mean trouble, especially if you’re planning to sell your home. It’s best to speak with a licensed conveyancer to hear their expert opinion on this.

How to Calculate Your Equity

To calculate the equity in your property, you need to know its current market value and how much you have remaining on your mortgage loan. The difference between these two will be your equity.

Here’s an example. Let’s say you purchased a home worth £150,000 at the time with a mortgage of £120,000. Now your property is valued at only £110,000. It means you are in negative equity. However, if you own your house outright with no mortgage you can’t be in negative equity.

Are You At Risk of Being in Negative Equity?

If you are from an area that has been drastically affected by drops in house prices and your mortgage is at 95% or 100%, then you are at a very high risk of going into negative equity. You are also at risk if you have an interest-only mortgage or you overpaid for your property at the time of your purchase.

How Negative Equity Affects Your Mortgage

If you are thinking about a remortgage and you’re in negative equity, it’s highly unlikely that you’ll get approval from your lender. Of course, your ability to be out of negative equity and to remortgage largely depends on the type of mortgage that you have.

Those who have negative equity on an interest-only mortgage will deal with some complexities. Apart from overpaying on your mortgage if the lender allows you, it also means you’ll have to wait it out until the housing market gets better.

If you’re on a fixed-rate mortgage, it’s advisable that you continue to do so until you finish your term. If you are still in negative equity close to the end of the mortgage, think about overpaying or sorting things out before getting a new deal.

Also, every monthly payment to your mortgage with a tracker mortgage can help lower your negative equity, given that the mortgage isn’t interest-only. If you continue with your monthly payments, you are working towards getting out of your negative equity.

What Is Negative Equity Mortgage

If paying off some of your negative equity is not an option for you, a negative equity mortgage might be a good idea. For instance, there are mortgage brokers that offer a negative equity mortgage to their existing borrowers but only if they meet their strict criteria.

Some advantages of this is that you get to move house without needing to pay off your negative equity straight away. You can also apply for a negative equity mortgage even if your existing mortgage is with a different lender.

There are drawbacks to this, of course. One is that negative equity mortgages are typically subject to early repayment fees because you’ll be ending your existing mortgage earlier. There might also be additional fees from your new mortgage, especially if the interest rates are higher. You might also find it difficult to find a lender that offers a negative equity mortgage.

How to Remortgage If You Are in Negative Equity

Most lenders will refuse your remortgage if you are still in negative equity. That said, some may allow you if you include a guarantor on a new mortgage. What this means is that you will need a guarantor to secure the loan not only on their own property but yours, too. Evidently, this is a huge decision to make especially for your guarantor, so make sure that they are well-informed of the terms and conditions before you choose this route.

Aside from that, there is also the option to get a bridging loan or a second charge mortgage. But this is if you’re looking for short-term answers. If you are hesitant to put your home at risk because of these additional loans, there’s the option to clear your negative equity by getting an unsecured loan from the bank or building society. Yes, it’s a much more expensive option but your property will not be at a high risk.

Before choosing the best solution for you, it’s a good idea to speak with a financial advisor or a conveyancing solicitor to make sure that you have everything you need to make an informed decision. Securing other debts could mean you are putting your home at risk of repossession, so think long and hard about your options.


Being in negative equity is not a good position to be in especially if you are thinking of selling your house soon. That is why it is important to find out whether or not you are in negative equity. Make sure that you seek the assistance of a licensed conveyancer who can provide you with their expert opinion and help you make a smart decision. You can compare conveyancing fees using a trusted online tool like Conveyancing Calculator.

Conveyancing Calculator allows you to compare conveyancing quotes in an instant. You won’t need to call every conveyancer in your area to find out about their rates and find the right one right from our platform. Find your conveyancer today using Conveyancing Calculator!


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