OneTaskBy Tim King · Updated
Negative Equity Calculator
Mortgage Shortfall and Time to Recover
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How the Negative Equity Calculator works
This negative equity calculator shows whether you owe more on your home than it is worth. Enter the value, what you owe and the cost of selling to see the shortfall you would face if you sold today, your loan to value, and a year by year view of when repayments and price changes should lift you back above water.
How the negative equity calculator works
Equity is the home's value minus everything secured on it. The calculator then takes off selling costs such as agent and legal fees, because those come out of the sale price too. If the result is below zero you are in negative equity, and that figure is the gap you would need to cover to sell and clear the mortgage.
When you get back to positive equity
Each month the calculator adds interest to the balance, takes off your payment, and grows or shrinks the home value by your expected yearly price change. The table stops at the first year where equity after selling costs is positive. Interest-only payments that do not reduce the balance will show recovery only if prices rise.
Options if you are in negative equity
Staying put and paying down the loan is often the simplest route. Overpaying speeds recovery, and some lenders offer negative equity mortgages that let you move and carry the shortfall. Speak to your lender early if you need to sell or are struggling with payments.
Negative equity formula and worked examples
The formula is equity after selling = home value − mortgage − other secured loans − home value × selling cost %. A negative result is your shortfall.
Worked example 1: a home worth 250,000 with 245,000 owed has 5,000 of equity on paper. Selling costs at 3% are 7,500, so selling today would leave a 2,500 shortfall.
Worked example 2: if prices fall 10%, the home is worth 225,000. Equity is −20,000 and, after 6,750 of selling costs, the shortfall is 26,750.
The table shows how many pounds or dollars of equity that same home has at price changes from −10% to +10%.
Equity for a 250,000 home with 245,000 owed, at different price changes.
| Price change | Home value | Equity before costs | Equity after 3% selling costs |
|---|---|---|---|
| -10% | 225,000 | -20,000 | -26,750 |
| -9% | 227,500 | -17,500 | -24,325 |
| -8% | 230,000 | -15,000 | -21,900 |
| -7% | 232,500 | -12,500 | -19,475 |
| -6% | 235,000 | -10,000 | -17,050 |
| -5% | 237,500 | -7,500 | -14,625 |
| -4% | 240,000 | -5,000 | -12,200 |
| -3% | 242,500 | -2,500 | -9,775 |
| -2% | 245,000 | 0 | -7,350 |
| -1% | 247,500 | 2,500 | -4,925 |
| 0% | 250,000 | 5,000 | -2,500 |
| +1% | 252,500 | 7,500 | -75 |
| +2% | 255,000 | 10,000 | 2,350 |
| +3% | 257,500 | 12,500 | 4,775 |
| +4% | 260,000 | 15,000 | 7,200 |
| +5% | 262,500 | 17,500 | 9,625 |
| +6% | 265,000 | 20,000 | 12,050 |
| +7% | 267,500 | 22,500 | 14,475 |
| +8% | 270,000 | 25,000 | 16,900 |
| +9% | 272,500 | 27,500 | 19,325 |
| +10% | 275,000 | 30,000 | 21,750 |
FAQ
What does negative equity mean?
It means the outstanding mortgage and any other secured loans are larger than the home is worth. You can keep living there and paying as normal, but selling would not raise enough to clear the debt.
Can I remortgage if I am in negative equity?
Most lenders will not offer a new deal above 100% loan to value, but your existing lender can usually move you to another of its products. This calculator's loan to value figure helps you see where you stand.
How accurate is the time to recover?
It is an estimate. It assumes a steady interest rate, the same payment every month and a constant price change, none of which are guaranteed. Try a range of growth rates to see how sensitive the answer is.
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