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Can I Sell a House with Negative Equity?

Negative equity is the term used to describe a home that is worth less than the mortgage secured on it. If you’re in this position, selling your home at a good price on the open market wouldn’t raise sufficient money to pay off your mortgage.

If you don’t have the means to pay the difference, there’s a good chance you’re stuck in your property indefinitely. That’s why we’ve put together a list of potential options. Yes, you can sell a house with negative equity — but is it the right move?

Speak to your mortgage provider

If you’re happy to remain in your home and can afford the mortgage repayments, negative equity might not be a major short-term concern for you. However, if you want to move, you might need to take a proactive approach.

Reach out to your mortgage advisor and ask about transferring your mortgage to another home. A lot of lenders will transfer the mortgage to a more expensive property if you sign up to a larger balance.

Sell a house with negative equity Sell a house with negative equity

Alternatively, you might be able to make overpayments on your mortgage without incurring penalties. This is usually the quickest way to get yourself back into positive equity. You should be allowed to pay off at least 10% of your balance early without incurring penalties. So if you can unlock savings or investments elsewhere, this is a good option.

Stay at home

The simplest and cheapest option is to ride things out. If you’re in negative equity, it’s probably because of a sudden decline in the local property market. These things tend to right themselves over time.

If you’re happy in your property and have no problem paying your mortgage, wait until the market recovers. If you don’t have to worry about repossession, you can ride out the storm and wait for local house prices to recover.

Negative equity only becomes a significant problem when you can’t afford repayments, or you need to sell your house fast.

Increase the market value of your home

Three things get you out of negative equity: debt reduction, rising house prices and an increase in the market value of the property.

Take a look at the houses for sale in your area. What do they have that your home doesn’t? In many cases, you’ll be able to improve your house without a huge cash outlay. A few enhancements or repairs might add a couple of thousand to your home’s market value.

Rent out your property

So, you can’t afford to move home, but you need to leave as soon as possible. Perhaps you’re struggling to keep up with mortgage repayments. Or maybe you need to relocate for a new job. In either case, negative equity could be holding you back.

In these circumstances, the most logical decision is to rent out your home. You can use the income to pay off your mortgage or any debts secured on your home. You might even be able to turn a profit. Renting gives you breathing space. House prices always recover eventually; you just need to be patient.

Take out a loan

Sell a house with negative equity

If the negative equity in your home is relatively modest, an unsecured loan might be enough to make up the difference. Make sure you get a good rate of interest, and that you can comfortably afford the repayments. But beware: this type of borrowing is always more expensive than securing a loan against your property.

Sell as quickly as possible

Check with your mortgage provider about the best way forward. But if you’re in serious financial difficulties, you might need to ask about selling your home as quickly as possible. Some lenders will accept repayment programmes after the property is sold.

If you need to sell a home quickly to alleviate financial problems, Flying Homes can help. We buy homes directly from owners for up to 100% of their market value. If the circumstances are right, you could have the proceeds of the sale within just a few days.

What is Negative Equity and What Can I Do About It?

You may have heard the term ‘negative equity’ quite a lot in recent years. The housing and banking crashes of the late noughties resulted in thousands of UK homeowners succumbing to the property phenomenon.

Negative equity doesn’t just affect property owners at times of financial crisis. It can strike at any time — making life difficult for people who want to move on or cash in on their home.

We’ve put together a short guide to negative equity, so you have an idea of how to react if it affects you.

What is negative equity?

If your home is in negative equity, it means you owe more for your home than it’s worth. If you were to sell your home for its market value, you wouldn’t have enough to pay off your mortgage.

In most cases, this scenario is caused by a sudden fall in house prices. Imagine you bought a home for £200,000 with a mortgage of £180,000. After a sudden drop in prices just a few weeks after the purchase, your home’s value plummets to just £160,000. This means you owe £20,000 more than your home’s new value.

A lot of people fall into negative equity because they remortgage to fund home improvements. And when this happens, selling can become impossible.

Am I in negative equity?

Am I in negative equity?

The truth is negative equity doesn’t affect everyone in the same way. For instance, if you’re planning to live in your current home for the rest of your life, you’re unaffected as long as you keep up with mortgage repayments.

A lot of people don’t realise they have negative equity until they try to sell. It’s not until a home is valued that the problem becomes apparent. Call your mortgage lender and get the exact figure you still owe. Then get your home valued by a local estate agent. If you owe more than the likely sale price your home will fetch, you’re in negative equity.

Can I sell a home that’s in negative equity?

This depends on whether or not you have money in the bank to pay off your mortgage after the sale goes through. Most people don’t have this sort of cash to spare. And as a result, they’re trapped in their mortgage and their home. If you can afford to pay the mortgage lender what you still owe after selling, you can sell. But this doesn’t mean selling is the best option.

A lot of people keep up with their mortgage repayments and wait for things to improve. After all, house prices are volatile in the UK, and they rise as quickly as they fall. And as you pay off your home loan, the negative equity gradually reduces.

Can I get out of negative equity?

Yes, but there’s no quick or cheap fix. You either have to wait it out or stump up the difference. Here are your options:

Can I get out of negative equity?

Dealing with negative equity – make extra mortgage payments

The obvious choice is to repay more of your mortgage to eradicate the negative equity faster. Speak to your lender about making additional payments. However, be aware that there may be financial penalties for making extra payments.

Sell and pay the difference

Sell your home, and the money raised will go towards paying down your mortgage. You’re liable for what’s left, so you’ll need to pay this as well. If you have money in the bank, great. But you might also be able to borrow what you need from a commercial lender, a friend or a relative.

File for bankruptcy

Bankruptcy should always be the nuclear option. It can affect your ability to obtain credit for several years afterward. You should only consider this solution if you’re in serious negative equity and can’t afford monthly repayments. Even then, there are ways out — including selling your house to a specialist home buyer such as Flying Homes.

Choose voluntary repossession

If you’re struggling to keep up with repayments and you’re in serious negative equity, speak to your bank about voluntary repossession. This will affect your credit rating, but it’s not as life-changing as bankruptcy can be.

If your home is in negative equity, don’t panic — but don’t bury your head in the sand. Speak to your lender or a financial advisor about what you can do to tackle the issue.

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