Negative Equity – What Is It? How Can You Calculate It?

Posted on September 4, 2020 Categories: Finance, Getting a Survey, Moving Home, Selling Your House


The property market can be full of confusing language and jargon – terms such as ‘Negative Equity’ can be especially confusing if you are new to the home buying process.

Luckily, the team here at White Horse Surveyors have put together the following article to explain the term and what it can mean to homeowners.

What Is Negative Equity?

Equity relates to the share of a property that is owned by a homeowner. Therefore, ‘Negative Equity’ refers to a situation where an individual’s mortgage is greater than the current value of the home. This is typically a result of falling property prices and/or a financial crisis.
For instance, if your home is worth £100,000 but you have an outstanding mortgage of £125,000, you would be in negative equity for £25,000.

How Can You Calculate It?

You may not always be aware that your home is in Negative Equity.

The first stage will be to calculate the current value of your home. For this, we would advise that you consult a local RICS accredited surveyor – they will be able to provide the homeowner with an unbiased and impartial assessment on the property’s present market value.

Following this, you should get in contact with your lender to establish the outstanding value of your mortgage. Once you have these two values, you simply subtract the second value from the first.

Then the value of this sum is below zero, your home is in negative equity.

To summarise:


How Do You Manage It?

Unfortunately, there are no universal rules for homeowners who find themselves in negative equity and the options available will vary depending on your personal circumstances.

The good news is that, as long you are not currently looking to sell your home, being in negative equity is not likely to present any kind of immediate problem.

Most of the time, it is best to simply stay put and continue to make your mortgage repayments as normal. This will give the property market a chance to recover as well as increase your equity share on the home.

Alternatively, you could also try to increase the value by making improvements to the property (For more on this topic, check out our blog post here).

However, this will most likely involve significant spending that will not always result in a return on the initial investment.

If you are not able to remain in your property and do not want to take the risk of additional spending, your best course of action is to speak with your lender directly. Explain your situation and see if they can offer any alternative repayment schemes.

Contact Us

If you are trying to calculate your equity and require a prompt and informative valuation, please do not hesitate to contact our helpful and friendly sales team for advice on the process.

You can reach us by telephone on 01249 444465 or via email using .

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