Can I remortgage in negative equity?

It's very difficult to remortgage with a new lender while in negative equity, because no lender will offer a mortgage larger than the property's value. However, your existing lender may offer you a product transfer — moving you to a new deal with the same lender — without a fresh valuation. This is often the best option. Some lenders also offer negative equity mortgages or will let you port your mortgage to a new property. Contact your lender directly to discuss options.

Can I sell my house in negative equity?

Technically you can sell, but you'd need to pay the shortfall between the sale price and the mortgage balance out of your own pocket at completion. For example, if you sell for £180,000 but owe £200,000, you'd need to find £20,000 plus selling costs. If you can't afford the shortfall, you may be able to negotiate with your lender to accept a shortfall sale (similar to a short sale) — but this will affect your credit score and may leave you with an unsecured debt for the shortfall.

Will negative equity fix itself?

Often yes — if house prices recover over time and you continue making mortgage payments. Every mortgage payment reduces your balance, and over 5–10 years the combination of price recovery and balance reduction often resolves negative equity. The key is to keep up with your mortgage payments and avoid the need to sell during the period of negative equity. Overpaying your mortgage (if allowed) can accelerate the process.

Negative Equity Guide — What It Means and What You Can Do | PocketWise

Q: What is negative equity?

Negative equity means your property is worth less than the outstanding mortgage balance. For example, if your home is worth £180,000 but you owe £200,000 on your mortgage, you have £20,000 of negative equity. This can happen when house prices fall, when you bought with a very small deposit, or when you took out additional borrowing against the property. You only have an actual problem if you need to sell or remortgage — if you stay put and keep paying your mortgage, the situation often resolves itself over time as prices recover and you pay down the balance.

Negative equity happens when your home is worth less than what you owe on your mortgage. Here’s what it means, how it affects you, and what your options are.

What Is Negative Equity?

Term	Meaning
Equity	The portion of your home you own outright (property value minus mortgage balance)
Positive equity	Your home is worth more than your mortgage — you have equity
Negative equity	Your home is worth less than your mortgage — you owe more than it’s worth
Loan-to-Value (LTV)	Your mortgage as a percentage of the property value — over 100% means negative equity

Example

Detail	Amount
Property value when you bought it	£250,000
Mortgage	£237,500 (95% LTV)
Current property value	£220,000 (prices fell 12%)
Current mortgage balance	£230,000 (paid off some)
Equity	£220,000 – £230,000 = –£10,000
Current LTV	230,000 ÷ 220,000 = 105%

What Causes Negative Equity?

Cause	How it happens
House price falls	Regional or national price drops reduce your property’s value
High LTV mortgage	Buying with a 5%–10% deposit gives very little buffer
Interest-only mortgage	Balance doesn’t reduce — any price drop causes negative equity
Additional borrowing	Taking out more lending against the property
Overpaying for the property	Paying above market value (e.g. in a bidding war)
Local factors	New development, infrastructure changes, or area decline

Does Negative Equity Matter?

Situation	Impact
You’re staying put	No immediate impact — keep paying your mortgage as normal
You want to remortgage	Difficult with a new lender; product transfer usually possible
You need to sell	You’d need to pay the shortfall — or negotiate with your lender
You want to move	Complicated — may need a negative equity mortgage
You’re separating/divorcing	Can complicate property division
You lose your job / can’t pay	More serious — lender may repossess, leaving you with residual debt

Your Options

Option 1: Stay and Wait

Detail	Information
Strategy	Continue making mortgage payments and wait for prices to recover
Timeframe	Price recovery could take 2–10+ years depending on the market
Risk	Low — as long as you can afford payments
Cost	Nothing extra — you’re just continuing normal payments
Best for	Most people — especially if you like your home and can afford it

Option 2: Overpay Your Mortgage

Detail	Information
Strategy	Pay more than your minimum payment to reduce the balance faster
Typical overpayment limit	10% of the outstanding balance per year (check your mortgage terms)
Benefit	Reduces your negative equity and total interest paid
Example	Overpaying £200/month on a £230,000 mortgage saves years and thousands in interest
Best for	People with spare income who want to fix negative equity faster

Option 3: Product Transfer with Your Current Lender

Detail	Information
Strategy	Move to a new mortgage deal with your existing lender
Advantage	No new valuation needed — lender already has the mortgage
Availability	Most lenders offer product transfers even in negative equity
Rate	May not be the best rate available, but usually better than standard variable rate
Best for	When your fixed rate ends and you want to avoid SVR

Option 4: Negative Equity Mortgage (Porting)

Detail	Information
Strategy	Transfer your mortgage to a new property when you move
How it works	Existing lender allows you to port the mortgage, including the negative equity element
Availability	Not all lenders offer this; depends on your circumstances
Restriction	The new property usually needs additional borrowing — assessed on affordability
Best for	People who need to move (job relocation, family change)

Option 5: Shortfall Sale

Detail	Information
Strategy	Sell the property for less than you owe, with your lender’s agreement
Shortfall	You may still owe the difference as an unsecured debt
Credit impact	Serious — similar to a default or arrangement
When considered	Usually a last resort, or when circumstances make staying impossible
Lender agreement	Required — you cannot just sell without clearing the mortgage

Remortgaging in Negative Equity

Option	Possibility
New lender	Very unlikely — no lender will offer 100%+ LTV on a new application
Current lender product transfer	Usually available — your best option
Switch to repayment from interest-only	Helps reduce balance — good long-term strategy
Government schemes	Currently no specific negative equity scheme; check Help to Build or local authority schemes

If You Can’t Afford Your Payments

Step	Action
1	Contact your lender immediately — they must treat you fairly
2	Ask about a payment holiday (temporary)
3	Ask about switching to interest-only temporarily
4	Ask about extending your mortgage term to reduce monthly payments
5	Get free debt advice (StepChange, National Debtline, Citizens Advice)
6	Check if you’re eligible for Support for Mortgage Interest (SMI)
7	As a last resort, discuss a voluntary sale with your lender

Support for Mortgage Interest (SMI)

Detail	Information
What it is	A government loan that pays mortgage interest if you’re on certain benefits
Who qualifies	UC, Income-based JSA, Income-related ESA, Pension Credit, Income Support recipients
Waiting period	39 weeks (9 months) for most claimants; none for Pension Credit
Payment	Government pays interest directly to your lender
Repayment	It’s a loan — secured against your property, repaid when you sell or transfer ownership

How Quickly Can Negative Equity Resolve?

Factors	Detail
House price growth	Average UK house prices have grown ~3–5% per year historically
Mortgage payments	Each repayment mortgage payment reduces your balance
Overpayments	Accelerate balance reduction

Example Recovery Timeline

Starting position	Year 1	Year 3	Year 5
Property value: £220,000	£226,600 (3% growth)	£240,500	£255,100
Mortgage balance: £230,000	£225,800 (regular payments)	£216,800	£207,000
Equity	–£800	+£23,700	+£48,100

In this example, negative equity resolves within about 1 year with normal growth and regular payments.

Useful Links

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Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance — we do not offer financial advice. Seek independent mortgage advice before making decisions about borrowing.

Negative Equity Guide — What It Means and What You Can Do

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