Selling House to Be 100% Debt Free

DebtFree2018 wrote: »

So... A very long story short, over the last 20 years we ran up a lot of debt, in the region of £60,000.

We've reviewed in depth the various methods for paying this off and toyed with bankruptcy etc but due to various other reasons, selling the house makes sense. We'll have enough equity to pay off all our debts and start without all the stress and absurd monthly payments on cards etc and enough to put a deposit down on a smaller place - we're ok with that.

My question I guess is, does anybody have any advice who's done this before?

Is there anything I should be aware of when paying back our loans, cards, OD's etc?

Is there any pitfalls or knowledge anybody can share that they experienced during this process?

We'll be closing down all the credit cards once paid off, we'll have a very signifncalty improved income once we're not paying out over £2.5k a month in car payments, loans , CC's etc so we don't need cards etc moving forward and I sure as hell won't mind losing thinking about money 24/7

So really just after feedback from anybody who may have done this and anything they wished they had done but didn't or did and it went well etc.

Thanks

I haven't sold my house to clear my debts but thought I would give you another perspective.

We had debts approaching £100k. By the time I entered a DMP they were just over 95k - we managed somehow to get them down a bit but we were on our knees financially and emotionally.

We have significant equity in our home and could sell up and buy somewhere outright if we downsize to a flat. If we moved to a slightly worse area we could afford a 3 bed house. In the same area we could afford a 2 bed place and probably buy it outright. There is only DH and I at home now so all of these options were feasible.

We chose to stay put and enter a DMP. We are 3 years in and have reduced the debt balance to just over 45k.

Life is so much happier knowing we are dealing with our debts, living within our budget - but best of all this was not a quick solution that would mean we hadn't learned our financial lessons.

We now have a property that has actually increased in value more than if we had downsized and bought outright, i.e. the equity in this is greater than the equity would have been in a smaller property. In my eyes we have won on clearing the debts down and staying in a property we love and which has increased in value.

I wish you well whatever you decide to do - but just be sure that if you sell up and move to something smaller that you have learned the lessons not to accrue debts again - otherwise you could end up back in the same position.

I'll echo the comments above - do the groundwork first. You need to know exactly why you have incurred the debt - just it being there isn't enough. Downsizing because you want to downsize is one thing, but downsizing to pay off debt is as good as turning unsecured debt into secured - and that is pretty much always a no-no. Also remember that even downsizing will cost you money - agents fees, legal fees (for a sale & a purchase you're looking at £1500 - 2000 there) and of course the dreaded stamp duty as well as removal costs etc. No doubt there will also be costs related to the new property as well - redecorating etc.

First step - do a Statement of Affairs (SOA) and get a firm, solid budget in place and working for you. Are you still using Credit cards? If so, stop - if your budget works you don't need to be doing that. Have you got everything you possibly can onto 0% cards?

Put the building blocks for financial health into place before you make any substantial changes - you may still decide to follow the same path but you'll do it with a lot more security than in a few years time you won't find yourselves back in the same position again, only without the same options to put things right.