Part of our guide to selling your house for cash, fast.
Negative equity means you owe more on your mortgage than your home is worth. It’s stressful, but it doesn’t automatically trap you. You can sell — the question is how the gap between the sale price and your mortgage (the “shortfall”) gets dealt with.
Is negative equity likely where you live?
Average prices across Merseyside have risen strongly — the Merseyside average was about £200,000 in May 2026, up 5.1% on a year earlier. Most homeowners who bought in the last few years have more equity, not less. But averages hide big differences between property types.
| Area | Flats, Nov 2007 | Flats, May 2026 | Terraces, May 2021 | Terraces, May 2026 |
|---|---|---|---|---|
| Liverpool | £101,232 | £127,439 | £132,062 | £174,820 |
| Sefton | £108,080 | £126,121 | £140,853 | £181,729 |
| Wirral | £104,399 | £123,049 | £137,722 | £173,109 |
| Merseyside | £102,637 | £122,711 | £130,045 | £169,257 |
The people most exposed are usually those who bought a flat — particularly a new-build flat, which can sell at a premium when new and lose it on resale — or who borrowed at a high loan-to-value. Flats with building-safety issues, short leases or high service charges can also be worth less than owners expect.
Your options
Pay the shortfall from savings
If you can cover the gap, the sale works like any other. Your solicitor pays off the mortgage from the sale price plus your contribution.
Agree a sale with your lender
Some lenders run “assisted voluntary sale” schemes, where you stay in the home while it’s sold, the lender approves the agent and any offer, and may help with costs. Any shortfall left over is usually still owed, but you avoid the costs and stress of repossession.
Wait, if you can
If you can afford the payments and don’t need to move, staying put while prices recover — or while you pay the balance down — may be cheaper than selling now.
Letting the property
Some owners let the home instead. You’d need your lender’s permission (usually “consent to let”), and the rent needs to cover the mortgage and costs.
What happens to the shortfall
A shortfall left after a sale doesn’t disappear — it usually becomes an unsecured debt. According to National Debtline, lenders have up to 12 years to chase the capital and 6 years for the interest, and they must tell you within 6 years of the sale if they intend to recover it. Negotiate a repayment plan you can manage, and get free advice before you agree to anything.
Free, independent help
- MoneyHelper (opens in a new tab) — free, government-backed money guidance.
- National Debtline (opens in a new tab) — free debt advice, including guides on negative equity and mortgage shortfalls.
- StepChange (opens in a new tab) — free debt advice charity.
- Citizens Advice (opens in a new tab) — free local advice.
Would a direct sale help?
Only if our offer would clear the mortgage or your lender agrees to the shortfall. Because a direct sale is usually below open-market value, it can make a shortfall bigger rather than smaller. We’ll always tell you honestly if we think an open-market sale would leave you in a better position. If you’re behind on payments, start with our guide to mortgage difficulties — each area also has a local mortgage-arrears page.
Talking to your lender: what to prepare
- A current valuation or agents’ market appraisals — ideally more than one.
- Your mortgage balance and any early repayment charges, from your latest statement.
- A budget showing your income and outgoings, which a free debt adviser can help you prepare.
- Any offer you’ve received, and how the buyer is funding it.
- A proposal for the shortfall: savings, a lump sum from family, or a monthly repayment you can afford.
Lenders deal with this regularly. Arriving with a clear picture and a realistic proposal makes it much more likely they’ll agree to the sale.
Negative equity and separation
If you own the home jointly with someone you’re separating from, both owners normally need to agree to the sale, and both remain responsible for the mortgage until it’s repaid. Get legal advice on how any shortfall would be shared. Our divorce and separation page covers the practical side.
Local mortgage-arrears pages:
Common questions
Can I sell my house if I owe more than it’s worth?
Yes, but your lender has to agree, because the sale won’t clear the mortgage. You’ll need to pay the shortfall or agree how it will be repaid.
Can I move house in negative equity?
Some lenders offer “negative equity mortgages” that let you move the debt to a new home, but they’re limited. Speak to a mortgage adviser.
Will selling in negative equity affect my credit?
Not necessarily, if the shortfall is agreed and repaid. Missed payments and repossession affect your credit far more.
Should I sell or wait if I’m in negative equity?
If you can afford the payments and don’t need to move, waiting while you pay down the mortgage — or while prices recover — is often cheaper than selling. If payments are a struggle, speak to your lender and a free debt adviser first.
Sources
- National Debtline — Negative equity (England & Wales) (opens in a new tab)
- National Debtline — Mortgage shortfalls (opens in a new tab)
- MoneyHelper — Negative equity: what it means and what you can do (opens in a new tab)
- HM Land Registry Price Paid Data and UK House Price Index (Open Government Licence v3.0) (opens in a new tab)