Return to the Mortgage Glossary Home to view explanations for all mortgage terms. What follows is the definition for the term Negative Equity as it relates to mortgages in the UK. Negative EquityEquity, in relation to mortages, is a simple calculation of the value of your property minus any debt left secured against it (e.g. a mortgage). So, if you have £100,000 left to pay on a mortgage, and the value of your property is £150,000, then you are said to have £50,000 equity. Negative Equity in relation to mortgages, is when the value of your property drops below the outstanding amount of your debt. e.g. If you have £140,000 left to pay on a mortgage, but your property has dropped in value to £120,000, then you would have negative equity of £20,000. This can be a big problem for you if you are unable to meet your mortgage repayments, as it means that if you have to sell your home (or the mortgage provider reposseses it) then you will end up with no home, and will still owe the mortgage provider the amount of the negative equity. Negative equity occured a lot when the property market crashed in the 1980s. If you are able to continue making payments on your mortgage, then there is no danger for you being in negative equity, but it means that if you want to sell your property or move, then you will need to settle the amount of the negative equity with the mortgage provider before purchasing a new property. This ultimately means that negative equity forces most people to remain in their property, and paying their mortgage as normal until they get back into positive equity and are able to sell or move.
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