Understanding negative equity

We're here to help you understand what is meant by 'home equity', and what it means for you if you find yourself in a negative equity position due to falling house prices.

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Home equity and what it could mean for you

Home equity is the difference between the market value of your property and the amount owing on your home loan. Typically, equity increases over time as you pay off your home loan and see improvements in the market value.

Negative equity is when the market value of your home falls below the amount you owe. With the drop in house prices we've seen recently, this has meant more homeowners might find themselves in this position.

For most people, the subject of negative equity won't mean much. Generally, it only becomes an issue if you need to sell your home, want to borrow more, or can't make your home loan Principal and Interest repayments.

There are a couple of things that can improve your home equity:

  • Reducing the amount owing on your home loan.
  • An increase in the value of your home.

Guide to using your home equity

How to work out your home equity


    First you'll need to understand the market value of your property. 

    If you have a home loan with ASB you can use the estimated value range within ASB Home Central as an initial guide.

    Another good source is QV. Or, for a more accurate estimate, you can get a registered valuation on your home.


    Next you can work out your home equity using this simple calculation:

    (a) Take the market value of your property.

    (b) Subtract the amount you owe on any lending secured by the property (Hint: you can view this value easily on ASB Home Central).


    The resulting figure will be your home equity value. 

    See the below example to show how easy this is to calculate.

Here's a fictional example to show what we mean.

Let's say the market value of your home is $900,000, and your total lending amount is $700,000. This means your home equity would be $200,000.

If, on the other hand, the housing market fell after you recently purchased your home and the current market value is $850,000, and you have a total lending amount of $880,000. Now you would have a negative equity of -$30,000.

What you need to know about negative equity

In general, there's no reason to worry, provided you're comfortable staying in your home for the foreseeable future and continue to make your home loan Principal and Interest repayments.

To learn more about what a rise in interest rates means for you and your home loan, plus the ways in which we can support, this page is for you.

We've taken out some of the complexity and described the 'need to knows' of negative equity below.

    For those in a negative equity position it's best to try and avoid, where possible, selling your home during any market downturn. This is where you're more likely to realise any actual loss.

    If your house is sold and the sale price is less than the lending amount owing, then the balance remains as a debt that will need to be paid to the lender.

    If you want to read further information on housing market trends and cycles, reputable sites such as Corelogic and REINZ have great research and data insights.

    We understand that due to changes in your personal circumstances you may need to consider selling your house. To help make an informed decision the ASB team are here to support and talk through options with you.

Frequently asked questions

What will ASB do if I have negative equity?

We understand this can be worrying but rest assured this will not change your current home loan arrangement solely due to being in negative equity. We are here to work with you over the long term, and we recognise that the housing market can change.

Will I have to pay a higher interest rate?

No - moving into a negative equity position will not change the current interest rate you are paying.

We would look at your equity position if you are applying for a new home loan or adding to your loan.

However, if you are coming towards the end of a fixed term your new interest rate may be higher. This is due to the rising interest rate environment, rather than your equity position. You can learn more on our rising rates webpage to be prepared when the time comes to refix.

Will it affect my credit score?

No - it doesn't impact your credit score. Your credit score is calculated based on your repayment history for loans, credit cards and utilities. As long as you keep making payments it won't impact you.

Will I be able to top up my loan to make home improvements?

No - generally we will not be able to consider additional home lending if you are in a negative equity position. If you have critical needs, such as urgent home repairs caused by extreme weather events, please contact us to discuss how we may be able to support.

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Home loans Understanding negative equity - ASB Bank