Selling a house in negative equity

Negative equity means your home is worth less than the mortgage and any other loans secured on it. On its own it isn't an emergency: if you can keep up your payments and don't need to move, you can usually sit tight while you pay the mortgage down. If you do need to sell, you can, but you'll need your lender's permission, and any shortfall left after the sale is still a debt you owe.

This guide explains how to check where you stand, your options if you don't have to sell, and how a sale in negative equity works. It's general information for England and Wales. The rules are different in Scotland.

If you're also struggling with payments, get free, independent advice before you decide anything: MoneyHelper (0800 138 7777), Citizens Advice (0800 144 8848 in England, 0800 702 2020 in Wales), StepChange (0800 138 1111), National Debtline (0808 808 4000) or Shelter (0808 800 4444; Shelter Cymru on 08000 495 495 in Wales). And speak to your lender early.

What is negative equity?

You're in negative equity when the amount needed to clear your mortgage is more than the home would sell for. When you sell, the gap gets wider, because estate agent and legal fees, and any early repayment charge, come out of the sale money too.

An example with made-up figures:

	Amount
Sale price	£180,000
Selling costs (agent and solicitor)	£4,500
Money left to repay the mortgage	£175,500
Amount needed to clear the mortgage	£190,000
Shortfall	£14,500

How to check if you're in negative equity

1. Ask your lender for a redemption statement. This shows exactly what it would take to clear the mortgage today, including any early repayment charge. See early repayment charges.
2. Add any other secured loans, such as a second charge loan, because they're paid off from the sale too.
3. Find out what the home is worth. Ask two or three local estate agents for a free valuation and check recent sold prices nearby. Our guide on how much your house is worth explains how.
4. Take off the selling costs to see what you'd actually have to repay the mortgage with.

If you're behind on payments

Lenders must follow FCA rules on arrears. They must deal with you fairly, tell you about free debt advice, consider changes such as a longer term or deferring interest, and give you a reasonable time to sell if no affordable plan is possible. They must only repossess as a last resort. Read selling a house with mortgage arrears and how to stop repossession for the full picture.

Your options if you don't have to sell

Stay put and keep paying

With a repayment mortgage, every monthly payment reduces what you owe, so the gap narrows over time even if prices stay flat. If you can afford your payments and your home still suits you, waiting can be the cheapest choice.

Switch to a new deal with your current lender

When your fixed rate or other deal ends, ask your lender what new deals it offers. FCA rules let a lender move an existing borrower to a new deal without a full affordability check, as long as you're not borrowing more and nothing material to affordability changes. Moving to a different lender is much harder in negative equity, because you'd be asking it to lend more than the home is worth.

Overpay if you can

Paying a little extra each month or as a lump sum shrinks the mortgage faster. Check your mortgage terms first, because overpaying more than your deal allows can mean paying an early repayment charge.

Let the home

If you need to move but don't want to sell at a loss, letting the home can cover some or all of the mortgage. Think carefully before you do:

• You'll need your lender's permission (often called consent to let). Ask whether it will change your interest rate or charge a fee.
• You take on a landlord's legal duties and costs, and tax on the rental income.
• In England, since 1 May 2026, landlords can no longer use "no fault" evictions. If you later want to sell, you'd normally have to give your tenants 4 months' notice, and that can't take effect in the first 12 months of a tenancy.
• Wales has its own renting law (the Renting Homes (Wales) Act 2016), with different rules.

Selling in negative equity

Get your lender's permission first

If the sale won't pay off everything secured on the home, you'll need your lender's permission to sell. Contact it before you accept an offer, and be ready to show:

• valuations, or the offer you've received
• a breakdown of the selling costs
• your income and spending, so it can judge what you can afford towards the shortfall

Some lenders run assisted voluntary sale schemes, which can include help with selling fees or a pause on court action. If your lender refuses permission, you can complain to the Financial Ombudsman Service, which can order it to let you sell. You can also apply to court for an order for sale, but Citizens Advice says this can be complicated and expensive, so speak to a solicitor first.

Which way to sell?

In negative equity, every pound of the sale price reduces the debt you'll be left with. That makes the price matter even more than usual.

• Estate agent. Usually gets the highest price, so it normally leaves the smallest shortfall. It takes longer, which matters if you're behind on payments.
• Auction. Can be quick, but the price isn't certain and there are fees.
• Cash buying company. Can be quick, but buyers, including us, pay below market value, so the shortfall will be bigger. Citizens Advice notes that your lender can refuse a sale for less than you owe, and the FCA warns that some quick-sale buyers offer up to 35% below market value.

A quick sale only tends to make sense here when your lender agrees to it and the alternative is worse: for example, the home won't sell on the open market, or the costs of waiting are mounting faster than the discount. If you're considering any cash buyer, read how to check a cash house buyer, and talk it through with a free debt adviser first. Our offers are below market value, we explain how we reached the figure, and there's no obligation to accept.

What happens to the shortfall?

Once the home is sold, the shortfall is no longer secured on a property. National Debtline says it's usually treated as a non-priority debt, and you have options:

• Agree an affordable payment plan, based on a realistic budget.
• Ask the lender to write off some or all of it, especially if your income is low or you're ill or disabled.
• Offer a lump sum in full and final settlement, if you can raise one. Get advice first and get the agreement in writing.
• Use a debt solution, such as a Debt Relief Order (for total debts up to £50,000) or bankruptcy, after full advice.

How long can a lender chase it? In England and Wales, a lender generally has 12 years to take court action for the money it lent and 6 years for interest, under section 20 of the Limitation Act 1980. A payment or a written acknowledgement of the debt can restart the clock, so get advice before you reply to an old shortfall letter. If the home was repossessed and sold, FCA rules also say the lender must tell you within 6 years of the sale if it plans to recover the shortfall.

Moving home while in negative equity

If you need to move for work, family or a change in circumstances, talk to your lender before you put the home on the market. Ask what options it has for borrowers in negative equity who need to move, and get any offer in writing. Letting the home, covered above, is the other common route. Our guide to relocating and selling your house covers the timing and costs of a move.

Don't hand back the keys

It can feel like the simplest way out, but handing the keys to your lender doesn't end the debt. The lender sells the home, often for less than you'd get, and you still owe the shortfall plus its costs. Shelter warns it can also affect your credit rating, benefits and council housing options. Selling with your lender's agreement, or staying put, is usually better.

A checklist before you sell in negative equity

• A redemption statement from your lender, showing any early repayment charge
• Two or three valuations, plus recent sold prices nearby
• A list of every loan secured on the home
• Your selling costs worked out, so you know the likely shortfall
• Free debt advice, if you're struggling with payments or other debts
• Your lender's permission to sell, and how it will deal with the shortfall, in writing
• A realistic budget showing what you can pay towards the shortfall
• A plan for where you'll live next, and when
• If you're thinking about a Debt Relief Order or bankruptcy, advice before you agree a price

If you're selling because the payments have become too much, read selling a house with mortgage arrears as well, because lenders have extra duties when you're behind.