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Equity is the value of your property that you own outright. Negative equity is when the value is less than the mortgage outstanding on the property. This is normally the result of falling house prices and could be in your area or across the country. It may also be worse during a recession, when house prices can fall more rapidly.
If you’re thinking of buying a house and want to protect yourself against negative equity, here are some steps that could help.
Try not to worry if you find yourself in negative equity. If it’s a small amount, this could just be down to a change to the housing market. Keep an eye on it and think about your options:
Keep making your mortgage repayments and wait for equity to build. This is a long-term option for people who aren’t thinking about moving house.
If you can, pay more than your agreed monthly mortgage payments. This can reduce how much you owe more quickly.
Always check with your lender as fees may be involved when overpaying. Find out more about overpayments.
If you are worried about having negative equity, a financial adviser may be able to help. We recommend the National Debt Helpline or MoneyHelper.
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