Negative equity
Negative equity: what it means and what you can do
Understand the position accurately before assuming a sale is impossible.
The short answer
Negative equity means the property is worth less than the outstanding secured lending against it. A sale is still possible, but the shortfall has to be dealt with: the lender must agree, and the difference remains owed unless they agree otherwise. Confirming the redemption figure and a realistic current value is the only way to know whether you are actually in negative equity.
What this means
People often assume negative equity based on an out-of-date valuation. The first job is arithmetic: current realistic value, minus selling costs, against the redemption figure including any second charge.
If there is a genuine shortfall, a sale needs the lender's cooperation. Lenders do agree to shortfall sales, but they decide how the balance is treated.
Staying put and paying down the loan is a valid option where circumstances allow. Negative equity only becomes a problem when you have to move.
Your possible options
These are possibilities to consider, not recommendations. Which of them fits depends on your own circumstances.
Check the real numbers first
Redemption figure, second charges, realistic sale price and selling costs. Many suspected cases are not negative equity at all.
Stay and reduce the balance
Where you can afford the payments, time and capital repayment usually resolve the position.
Ask the lender about a shortfall sale
Lenders can consent to a sale that does not repay the loan in full and will set out how the balance is handled.
Specialist advice: This is a lender decision — get it in writing.
Consider porting the mortgage
Some products can be moved to another property, subject to affordability and the lender's rules.
Specialist advice: Mortgage adviser.
Take independent debt advice
Where the shortfall is significant, an adviser can explain how it would be treated.
Specialist advice: Independent debt adviser.
What should I do first?
- Request a written redemption figure from every secured lender.
- Get a realistic view of current value, not a hopeful one.
- Deduct the likely costs of selling from that value.
- Compare the two figures to see whether a shortfall genuinely exists.
- Speak to the lender before marketing the property.
- Take independent debt advice if there is a shortfall.
- Decide whether moving is necessary now or can wait.
You may need specialist advice
Lothian Property publishes property information. It is not a law firm, lender, financial adviser or estate agent, and the professionals below are independent of us.
- Your lender
- Lenders can only discuss your account, redemption figure or forbearance options with you directly.
- Mortgage adviser
- Borrowing, porting and affordability are regulated advice. An FCA-authorised adviser can review your options.
- Independent debt adviser
- Free, impartial help is available from services such as Citizens Advice Scotland and the Money Advice Service.
- Chartered surveyor
- A RICS surveyor prepares the Home Report and can assess condition, defects and repair costs.
What to do next
Understand your property position first
Tell us about the property and what has changed. We will set out what the information says, with no obligation to sell and no pressure to decide anything today.
Common questions
- Can I sell a house in negative equity?
- Usually only with the lender's agreement, because the sale will not repay the loan in full. The remaining balance stays owed unless the lender agrees otherwise.
- How do I know if I am in negative equity?
- Compare a realistic current value, less selling costs, with the total redemption figure across all secured lending.
- What happens to the shortfall if I sell?
- Unless the lender agrees to write part of it off, the balance remains owed to them after settlement. Get any agreement about the shortfall in writing before you market the property.
Sources
- Citizens Advice Scotland — charity
- MoneyHelper — government-backed
Related situations and guides
About Lothian Property
An independent starting point, not an estate agency
Lothian Property is an independent property information and introduction service. We are not an estate agency. We help homeowners understand their property, their options and their local market, and — where appropriate and only with your permission — introduce them to independent estate agents and other property professionals who can assist.
How Lothian Property worksPrepared by Lothian Property. Information last reviewed 2026-08-18; next review due 2027-02-18. General property information for Scotland, not legal, tax or financial advice. Editorial policy.