How can you get out of negative equity?

August 5, 2019

*Please note we are not mortgage advisers. We do not provide mortgages. If you are looking to remortgage please contact an independent mortgage adviser*


If the amount owing on your mortgage is higher than the value of your house, you are in negative equity. This can be an incredibly difficult financial situation, especially if you need to sell your home, or are looking to secure extra credit.

Negative equity affects homeowners across the UK, but Northern Ireland was particularly badly affected by the recession and house price crash in 2008 which saw many house prices tumble over 55% from their peak. Over 60,000 homes in Northern Ireland are still thought to be in negative equity, with the average shortfall being around £35,000.

So if you are in negative equity is there anything that you can do about it?

Wait for house prices to rise

The easiest thing to do if your house is in negative equity is to simply stay put and wait for house prices to rise, whilst continuing to chip away at your mortgage by making your monthly payments. Although there is no guarantee that house prices won’t fall again, in the UK house prices do generally tend to rise over time.

Overpay on your mortgage

Most lenders will allow a certain amount of penalty-free overpayments to be made on your mortgage. Overpayments will allow you to reduce the amount that you owe on your mortgage faster, thus bringing your total mortgage amount closer to your home’s value more rapidly. If you are in a position to afford higher monthly mortgage payments, contact your lender and find out how much you can overpay before incurring charges, or alternatively see if you could use any savings to pay off a lump sum.

Increase your home’s value

Boosting the value of your home can also help to reduce your negative equity. Large scale home improvements will of course make the biggest impact, but if you do not have the available capital for such schemes there are some small scale improvements that could still positively impact your home’s value. Cleaning, tidying and painting the exterior of your house, fixing any obvious problems – especially with the roof, increasing the amount of light in your house – even just with brighter lightbulbs, repainting drab walls, and thoroughly cleaning everywhere, can all make a surprising difference to your home’s value.

Rent out your home

If your home has a high enough potential rental value to cover your mortgage and you need to move somewhere different, letting it out whilst you rent somewhere more suitable could prove a helpful stop gap until the market improves and you are able to sell your home. You would need to check with your mortgage company as most lenders require you to change the terms of your mortgage if you rent your home out, and also factor in the cost of any improvements you would need to make to get it ready for the rental market.

Borrow the shortfall

In some cases you may be able to either sell some assets or possibly borrow money from friends and family to cover the difference between the amount that you can sell your house for and the amount you need to repay to your mortgage lender. This would allow you to sell your home and start again from scratch, but you may find it difficult to secure a new mortgage without a deposit.

Negotiate with your lender

In some circumstances mortgage lenders will be willing to transfer the negative equity part of your mortgage to an unsecured loan, or even write off that part of your debt, if this would be cheaper for them than repossessing your home. However such an arrangement is in no way guaranteed, and even if it could be agreed is likely to damage your credit rating.

Take out a specialist mortgage

These are rare and certainly not available to everyone, but there are some companies that will offer 100%+ mortgages to homeowners in negative equity. These mortgages tend to come with very strict conditions and high interest rates, so we would recommend contacting a specialist mortgage advisor if you are considering this route.

If you are in negative equity and are struggling to pay your mortgage you should contact your mortgage lender as a matter of urgency. They will be best placed to set out the options available to you to help you devise a plan moving forward.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

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