06, June, 2023

Can I sell my house in negative equity?

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What is Negative Equity? 
Negative equity means that your mortgage is higher than the value of your house.

If you’ve found yourself needing to sell your house for whatever reason, but you’re in negative equity, it can be a very difficult time for any homeowner to decide what the best thing to do is. We Buy Any House have looked into it and gathered some information that should make your options a little clearer.

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If your house is in negative equity, it means that your mortgage is higher than the value of your house. If you were to sell the house, you’d be at a loss paying the rest of what you owe to your lender.
When it comes to selling a house in negative equity, it can be very hard work. You will have to get your lenders permission to sell the house before you go any further, as a lot of lenders will not allow the sale if you are in negative equity.
Some lenders may allow you to carry the shortfall from your mortgage over and add it to a new mortgage on a new property, but there are conditions depending on your lender. Some fairly standard ones are;

  • You will have to move rather than be moving because you want to, for example, if you needed to relocate for work or for a family issue
  • You’re employed full time
  • You can prove that you’ll be able to afford the new mortgage payments

You’ll also need to have enough money to put your deposit down for a mortgage on the new house, which can be difficult if you haven’t had much notice about needing to move or are moving for a financial reason.

Can I get a negative equity mortgage?

It will depend on certain factors;

  • How much negative equity you have
  • The value of the property that you’re wanting to move to
  • If you’re in arrears with your current mortgage
  • The deposit that you have for your new house.

What are the pros and cons of a negative equity mortgage?

What do I do if my lender won’t let me sell the house?

If your lender doesn’t have any early payment fees in place for your mortgage, it’s worth making the most of this and trying to pay off as much of the mortgage as you can afford to. Some lenders have fees in place, but you can ask if this is the case or not so you know.  You can use a mortgage overpayment calculator to see how much of a difference the overpayments will make- you may be surprised how quickly it starts to improve your situation if you’re able to overpay for a period.

You can also look at renting your house out instead of selling it and renting a property where you need to move to. You will still need to let your lender know that you’re planning to do this, as your mortgage will need to be changed to a buy-to-let mortgage, and there may be a higher interest rate in doing this, but your tenants rent would cover your monthly mortgage payment and give you some freedom to move where you need to.

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