How to remortgage Negative equity

Negative equity is only a problem if you want to remortgage or sell

What is negative equity?

Negative equity means that the amount outstanding on your mortgage is higher than the value of your property. 

The number of people in negative equity has been growing since the credit crunch but it is only a problem if you want to remortgage or sell your home.

If you are not planning to remortgage or sell, there is no need to worry about negative equity as long as you're able to continue to pay the mortgage. It's important to remember that you won't be threatened with repossession just because you're in negative equity.

In the 1990s, thousands of homeowners fell into negative equity but the majority survived with their homes intact by simply waiting out the downturn in the property market.

Are you in negative equity?

To find out if you are in negative equity, get your mortgage balance from your lender and compare it with the current value of your home.

Get local estate agents to value your home. If you can afford it and your mortgage allows, it's a good idea to make overpayments, whether or not you're currently in negative equity.

What are your options if you are in negative equity?

If you're in negative equity, it's unlikely that you will be able to remortgage as most deals that let you borrow more than 90% of the property’s value have disappeared. 

This means you may be forced to stay on your lender's standard-variable rate (SVR) with no option to go elsewhere, although many SVRs have proved to offer good deals recently because the Bank of England base rate of interest they follow has fallen so much.

It's still worth asking your mortgage lender what else it can offer you though. You can also seek advice. The Which? Group provides an independent mortgage advice service that looks at every mortgage from every available lender. Alternatively, you can find a broker by visiting Unbiased.co.uk.

If you are struggling with your mortgage payments contact your mortgage lender immediately as it may be able to offer help. You may be able to increase the mortgage term to make your payments more affordable, although you will end up paying more interest overall. You could also temporarily switch to paying the interest only.

Visit the Which? guide to avoiding repossession for more information.