Negative Equity Calculator Assess how underwater you are on a car or home loan — and find the fastest, cheapest path back...

Negative Equity Calculator

Assess how underwater you are on a car or home loan — and find the fastest, cheapest path back to positive equity.

Auto Loan

Mortgage

Escape Plan

Current Market Value ($)

Loan Balance ($)

Months Remaining

Interest Rate (%)

Annual Miles

Condition Excellent Good Fair

Current Home Value ($)

Mortgage Balance ($)

ZIP Code (for local trends)

Negative Equity ($)

New Loan Term (Months)

New Rate (%)

Extra Payment ($/mo)

Sell & Pay Out-of-Pocket ($)

−$0

Negative Equity

—

Months to Break Even

$0

Interest to Break Even

0%

Loan-to-Value (LTV)

Equity Timeline: Balance vs. Value

What Is Negative Equity?

Negative equity** (aka “being upside-down”) occurs when you owe **more** on a loan than the asset is worth.

Formula**:

$$\text{Equity} = \text{Market Value} - \text{Loan Balance}$$

Example: $18,000 car, $22,000 loan → **−$4,000 equity**.

Why it happens**:

• Depreciation > Paydown — Cars lose 15–20% value Year 1
• Low down payment** — <10% down = high risk of being underwater
• Long loan terms** — 72–84 month loans delay principal reduction
• Market drops** — Home values fell 30% in 2008–2011

The Trade-In Trap

⚠️ Rolling negative equity into a new loan is dangerous:

• Example: $5,000 gap + $30,000 new car = $35,000 loan → 72 months @ 7.5% = **$44,200 total cost** → You pay **$9,200 extra** just to cover old debt
• GAP Insurance** covers the gap if totaled — but *not* if you trade in voluntarily.
• LTV Risk** — >120% LTV loans often have higher rates and stricter terms.

✅ Better options**:

• Make extra payments to reach 100% LTV before trading
• Sell privately (get 10–15% more than dealer trade-in)
• Keep the car, pay down faster, and insure with GAP

2025 Negative Equity Benchmarks

• New Cars: 30% of buyers start underwater; avg. gap = **$4,800** (Experian)
• Used Cars: 52% of subprime loans are >125% LTV
• Mortgages: Only 2.7% of U.S. homes are underwater (Black Knight, Q1 2025)
• Recovery Time**:
• Car: 24–36 months (at 10% depreciation + standard paydown)
• Home: 5–7 years (at 3% appreciation)

📉 Depreciation Curve (Typical Sedan)**:

• Month 0: $35,000 (MSRP)
• Month 12: $29,750 (−15%)
• Month 24: $26,775 (−23.5%)
• Month 36: $24,098 (−31.2%)

How to Use This Calculator

➡️ Auto Loan

Enter current value, loan balance, and term to see gap size, LTV, and break-even timeline.

➡️ Mortgage

Compare current Zillow/Redfin estimate vs. balance. ZIP code adjusts for local appreciation.

➡️ Escape Plan

Compare strategies: roll gap, pay cash, or accelerate payoff with extra payments.

Note: Auto values use KBB depreciation curves. Home values assume 3% national avg. appreciation (adjust ZIP for local accuracy).