What does negative equity mean?

Your property is worth less than what you owe on the loan. It's the opposite of having equity.

Does the bank do anything if I'm in negative equity?

No. As long as your repayments are on time, the bank has nothing to act on. They've already lent you the money.

Can I refinance while in negative equity?

Usually not, because the new bank values the property and won't lend more than it's worth. Time and paying down the loan are what get you back to a refinanceable position.

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What is negative equity?

Bayley Clarke · Mortgage broker on the road · Last checked 3 September 2026 · 2 min read

The short answer

Negative equity is the opposite of having equity in your home. It just means your property is worth less than what you owe on the loan. That's it.

Is the bank going to knock on your door and want money, or try and sell your house from under you? No, absolutely not. They've already given you the money. As long as you keep making your repayments on time, there's no reason for the bank to come after you.

The one minute version. The rest of this page is the detail underneath it.

The definition

Equity is the gap between what your property is worth and what you owe on it. Worth $600k, owe $450k, you've got $150k of equity. Negative equity is that gap going the other way. Worth $430k, owe $450k, you're $20k under.

It happens when values fall after you buy, and it's more common when you started with a small deposit, which is why it comes up around the 5% scheme.

What the bank can do about it

Nothing. There's nothing they can do. They've already given you the money. As long as you continue to make your repayments on time, there's no reason for the bank to come after you.

It can be stressful mentally, and it will take up a lot of real estate in your mind, pun intended. But stress and a bank action are different things. The first is real. The second doesn't happen while you're paying.

What to do while you wait it out

Property has its ebbs and flows. Things come up, they come down. But over time what we've seen is that property continues to grow, and it's a time in the market, not a timing of the market.

So if you've recently purchased and you're worried about negative equity, just continue making your repayments, do the things you can do to add value to your property, and let the market take care of itself. Where it matters is if you want to reprice or refinance, because the value has to be there for that.

The honest bit: it's a number, until you need to move

If you're staying in the house and paying the loan, negative equity is a line on a statement and nothing more. Where it bites is if you have to sell or refinance before the value comes back, because then the shortfall is real money.

That's the one thing worth planning around. Buy on a budget you can hold for years, not months.

Worried about where you sit?

A 30 minute call. I can check what your place is likely worth against your loan today and tell you straight whether there's anything to do or just time to give it.

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