What is negative equity?
Interest-only mortgages can increase the risk of negative equity. This is because you only ever pay the interest on the amount you borrow, rather than repaying the mortgage sum.
The total amount you owe is repaid at the end of the mortgage.
Because you’re not paying off your mortgage amount, you don’t build equity in your property, so a fall in property prices could put you at risk.
Moving home and negative equity
Negative equity can mean selling your home for less than the value of the mortgage you took out to buy it.
This is because you’ll have an outstanding amount of money on the mortgage that you have to pay back after the sale. If you don’t have savings or other funds available, it may be difficult to pay this and it may not be easy for you to sell your house.
Important legal information
Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.
Telephone calls may be monitored or recorded in case we need to check we have carried out your instructions correctly and to help us improve our quality of service.