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The term ‘negative equity’ refers to your financial situation when the current value of your home is lower than the amount you have left to pay on your mortgage. In other words, negative equity occurs when your mortgage is higher than the amount of money you could sell your property for.

It’s not an easy situation if you’re trapped in negative equity but need to move, but don’t worry. There are a number of options you can choose to get around the problem and sell your house:

Speak to your mortgage lender

If you want to sell your house in negative equity, you will need to have a discussion with your mortgage lender as you won’t be able to sell the property at a lower price than the money you owe.

That said, some building societies and banks provide specialised mortgage products for those in negative equity; these allow you to transfer your mortgage debt onto the new house. But be aware that this will mean increasing your existing payments to make up for the shortfall. This option would certainly allow you to move, but it would mean either paying more each month or increasing the term of your mortgage, meaning you’d pay more in the long-run.

Having a discussion with your mortgage lender will give you a clear idea of how much of your mortgage needs to be paid and whether you can move your current mortgage to another property, re-mortgage to a different deal or consider other financing options.

You can also speak to a mortgage advisor who can advise you on how to go about this. We have teamed up with Life Financial Services, to provide you with impartial expert advice. Click here if you need to speak to a mortgage advisor in this regard.

Pay off your loan using other savings

Another option is to use other savings to pay off some of your existing mortgage before you sell. This could potentially bring you out of negative equity if you have enough saved to make the cost of the loan match the value of the property.

This might seem like a relatively simple solution, but before you put all your savings into paying off your mortgage, make sure it makes sense to your financial situation. A few important points to consider are:

  • Are you likely to need your savings for other important purchases in the future?
  • How much interest would you earn on your savings if you didn’t use them to pay off your mortgage?
  • Will you incur any interest penalties for withdrawing your savings?
  • Will there be a charge for paying off a lump sum of your mortgage? This can be checked with your mortgage lender.

Take out a loan to borrow the difference

Whether you decide to take out a loan or not will depend on the difference in the value of your home and the amount of money outstanding on your mortgage. If you do decide to follow this route, make sure you can manage the loan repayments and also ensure you get the best possible rate. It’s worth remembering that taking out an unsecured loan will increase your debts and is likely to cost more than what you owe on your mortgage. You can also speak to our expert financial services partner Life FS to assist you with this.


Looking to increase the value of your property? Why not read our articles on What adds most value to a house and how to add value to your home on a budget.

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Raise your home’s value by making improvements

Making improvements to your property before putting it on the market can increase its value, therefore reducing your amount of negative equity.

It’s possible to boost the value of your property without spending too much money. Have a look at similar houses that are being sold in your area to see what sort of features they have to attract potential buyers, and work out how much these changes would cost to make to your home. There may well be some enhancements that you can make to your property that will add value without breaking the bank.

Find out more about how to add value to your home on a budget here.

Alternatively, we have a team of refurbishing experts who can assist you with this. Our team will advise on what are the best options to improve the value of your property based on your individual circumstances, and can manage the process for you.

Rent out your property

If you need to move sooner rather than later but are unable to sell your property, renting out your home could be an option to think about.

In this circumstance, you would still own your home and would repay your mortgage through rental income. In the meantime, you would be renting elsewhere until your property is freed from negative equity, leaving you ready to sell.

You would need to get consent to do this, as most mortgages are based on an agreement that only you and your family will be living in the property. To rent your home out, you will need to switch to a buy-to-let mortgage, which can potentially increase your repayments and interest rate.

It’s also worth remembering that you might need to carry out work to prepare your property for rent, and think about how you would manage your tenants. One stress-free way to do this is to use an estate agent; find out how Chancellors can help you manage your rental property here.

Stay put and try to stick it out

If you don’t need to move as soon as possible, it might be worth staying put and waiting for the market to improve. This tends to be the cheapest option if you’re in negative equity, as you’ll gradually reduce the size of your mortgage each month as you pay it off whilst the property value increases.

If you want to move sooner rather than later, you could speed things up by making overpayments on your mortgage, but make sure you won’t be charged penalties for doing so before you decide on this plan.

Typically, most mortgages will allow you to overpay by around 10% without penalty. However, this is not universal, so be sure to check with your lender before making a decision.

It’s important to remember that, due to constant changes in the market, negative equity isn’t necessarily a permanent condition. Any of the above methods can help you sell your home if you are in negative equity, but it’s worth speaking to a mortgage advisor to find out what the best solution for your situation is.

If you need help selling a house in negative equity, or are just looking for comprehensive guidance on selling a property, check out our selling houses section.

Looking to sell your property? Book a free no-obligation Market Appraisal