Should we sell our house and rent??

fastnet · 25 February 2014 at 2:20PM

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Hello All,

Newbie alert …..well not completely I have read the forums on and off over the years but never really posted.

I wanted to get some advice as my husband and I need to make a decsion, that if I am honest we have been putting off for a long time.

Should we sell our house?

It would be great to get some objective views and opinions from people who have been or are in a similair debt situation to ourselves. I have summarised as best I can below. Any comments very welcome.

- We have approx £100k in debt
- We are in a DMP with Stepchange.
- Prior to that we were in a DMP with Payplan for about 7 years.
- We should have committed to an IVA years ago – but we havent and we don’t really want to go down that road now if we can avoid it.
- We want to be debt free.
- We both work full time.
- I earn approx £36k and my husband £49k.
- We are both 41.
- We have two children 7 and 8.
- We are desperate for more space. My boy and girl are sharing a room and for my daughter particularly (she is 8 and half) this isnt going to be manageable for very much longer, she is getting older and they cant really share as teenagers as a boy and girl.
- We could do a loft conversion which we had hope to do to solve the space issue but cant find a way to raise the cash.
- We have a mortgage on our house with NRAM (was Northern Rock) we are mortgage prisoners in that we cant remortgage (due to credit file and level of debt), we are on an interest only mortgage.
- For a long time we were in negative equity, but we are in a desirable area and there has been a significant increase in house prices locally. We have just had the house valued at approx £280k - £300k. Our mortgae is £190k.
- We love our house, we love the area, we love the location, we have lived here for 10 years and all our friends are in the surrounding roads.

So the question is ….should we sell and go into rented??

The way I see it:

Pros:
- We would have a chunk of money to offer F&F on our debts. I am hopeful we could clear the majority if not all? Am I being realistic though?
- This would mean that we could start to rebuild our credit file and get back on track within the next 5 years rather than 15 is we go down an IVA route.
- We would rent somewhere with more space and so solve the bedroom issue
- We earn good money and so could probably afford somewhere nice.
- We would be debt free and could start to plan out our future again, rather than just tread water
- My mental state would improve without having the burden of debt around my neck

Cons:
- We would have to rent and all the unpredictability and insecurity that comes with it.
- We would need to try and find the right rental property so that we could stay local
- We need to try and and find a way to explain to family and friends why we are doing this (no one really knows the financial situation we are in). I know this is just pride but it matters to me.
- I would have to give up the home I love and where my children were both born
- We may never be able to get back on the housing ladder
- We may have to move out of the area if we cant find anything local.

Thanks,
Fastnet

Tixy · 25 February 2014 at 5:29PM

Hi fastnet

Sounds like a really difficult decision.

You say you are on a DMP currently - how long is that currently predicted to last?

You mention that you are unable to remortgage currently due to your level of debt and your credit files - as you have been on a DMP for so long I would have imagined that most of your credit debts/defaults etc no longer show on your credit file? is that right?

So is it more the current level of debts that is the problem now?

kindofagilr · 25 February 2014 at 5:41PM

I would say yes

You have approk £110k equity in your house, and have 100k of debt

This way you can wipe ALL debt have a clear head, you can rent a nice 3 bedroom house and start saving up for a deposit it you wanted to buy another house again xx

Stewart_78 · 25 February 2014 at 5:59PM

What is the 100k made up of? Cards? Loans? How old are these debts? Are you paying interest on any of them? Are they defaulted and do they show on your file today? Are they secured against anything? How much do you pay into the DMP and what is the timescale? Without this info it's difficult to help.

My instinct says that on your joint income, you should be able to draw in your spending and get enough together in a year or 2 to make decent full and final offers.

It's easy to say sell and pay it all off but you might end up seriously regretting it.

FireWyrm · 25 February 2014 at 6:00PM

I second the 'sell the house' idea. It's a no-brainer. You could go bankrupt, but you'll lose the house anyway. There is no realistic way you could pay off £100K easily and with the space imperative, you really have little choice in the matter.

Renting however does mean uncertainty. You can be evicted with just two months notice, rent increases are endemic, so make sure you understand this. You'll need a sizeable chunk of money to start the renting game what with deposits, credit checks etc. When you move in, take photos of everything and demand and inventory. Ensure you deposit is protected in one of the three government approved schemes. With your undesirable credit history, you might have trouble renting without either a pretty hefty deposit or a guarantor, so be prepared for it.

fastnet · 25 February 2014 at 6:56PM

Tixy wrote: »

Hi fastnet

Sounds like a really difficult decision.

You say you are on a DMP currently - how long is that currently predicted to last?

You mention that you are unable to remortgage currently due to your level of debt and your credit files - as you have been on a DMP for so long I would have imagined that most of your credit debts/defaults etc no longer show on your credit file? is that right?

So is it more the current level of debts that is the problem now?

Hi, thanks for replying yes it is more the level of the debts that is the issue as I cant see a way that we will get out from unde rit. Stepchange recommended a IVA for us as the DMP will take such a long time. However at the time, I had just gone back into work after being made redundant and wanted to be in my job a while before we committed to an IVA.

I have been there for 18 mths now - and it is as a secure (well as any job is) so we need to make a decision re: the debt. And an IVA is the only viable option other than this one.

fastnet · 25 February 2014 at 6:58PM

kindofagilr wrote: »

I would say yes

You have approk £110k equity in your house, and have 100k of debt

This way you can wipe ALL debt have a clear head, you can rent a nice 3 bedroom house and start saving up for a deposit it you wanted to buy another house again xx

Thanks for your reply - yes when I am thinking in a rational pragmatic way I think that this the right decision from a debt and space point of view. Emotionally though I struggle to leave my house! But have to think positively that this could be a good thing - a few years ago this was not an option as the house prices were so bad.

fastnet · 25 February 2014 at 7:04PM

Stewart_78 wrote: »

What is the 100k made up of? Cards? Loans? How old are these debts? Are you paying interest on any of them? Are they defaulted and do they show on your file today? Are they secured against anything? How much do you pay into the DMP and what is the timescale? Without this info it's difficult to help.

My instinct says that on your joint income, you should be able to draw in your spending and get enough together in a year or 2 to make decent full and final offers.

It's easy to say sell and pay it all off but you might end up seriously regretting it.

Thansk for your reply. Most are very old debts about 7 years old, I have a CCJ from 7 years ago so not sure if that will show on file still. We havent been paying interest on them since we first started a DMP about 8 years ago. No debts are secured against the house. Timescale of the DMP is about 18 years at the current payments (approx £330 a month) but we are in position to increase these now, but certainly not to apoint wheer we could clear our debts in 2 years.

I think if we didnt have the space issue as well, it may be a differnt decision, but the fact that we have we need to get a bedroom for my daughter and the house has increased in value it is easy to feel like we are sitting on the answer.

I dont want to rush into anything though and as you say regret it in the future.

fastnet · 25 February 2014 at 7:07PM

FireWyrm wrote: »

I second the 'sell the house' idea. It's a no-brainer. You could go bankrupt, but you'll lose the house anyway. There is no realistic way you could pay off £100K easily and with the space imperative, you really have little choice in the matter.

Renting however does mean uncertainty. You can be evicted with just two months notice, rent increases are endemic, so make sure you understand this. You'll need a sizeable chunk of money to start the renting game what with deposits, credit checks etc. When you move in, take photos of everything and demand and inventory. Ensure you deposit is protected in one of the three government approved schemes. With your undesirable credit history, you might have trouble renting without either a pretty hefty deposit or a guarantor, so be prepared for it.

Thanks for your reply. Yes it is beginning to feel like a 'no brainer' as it will solve two problems in one go. I am concsious I dont want to create any more problems inadvertently though so was keen to get other viewpoints outside of my mine and my husbands. if we acheive the selling price we would potentially be in the position of having a portion of money to set aside for deposits and 3-6 mths rent in advance

Puzzcat · 25 February 2014 at 7:55PM

Gosh what a hard decision. I have to say that for years prior to knowing about dmp's i always thought, oh well worse case scenario sell the house.
You have two bedrooms now, any possibility of splitting the biggest room, plasterboard walls? I remember as a child having a friend whose family had done this.
You earn very good money and obviously if you could up your dmp payments and cut back on your outgoings you could clear this debt but I appreciate it would be a long hard slog and you have already been doing it for sometime. If you do sell, you need to be realistic with legal bills, moving costs etc.
Just because a house is valued at that price doesn't mean it will sell for that, and you have a narrow margin and wouldn't want to be starting in a new rented house still with debts. Also you may have to change your lifestyle if it is this that has caused the current debt or it could all start again but without a house to sell.
Sorry just some ramblings from me. Good luck with whatever decision you make.

[Deleted User] · 25 February 2014 at 8:22PM

My parents have been through a very similar situation and their house has just recently sold. My mother didn't like the idea of renting at first and thought it would be very difficult for her to settle in a new home, however within a few months of moving into a rented house she was happy. Renting isn't perfect but if you're able to afford to pick a place you want to rent (which you can with your joint income) it's very good. The people that have problems renting are those that can only afford to rent the cheapest place from the dodgiest landlord, you won't have that problem when your debt is gone.

As mentioned my parents were very similar to you, but it took them until their children were much older than yours to commit to solving the problem once and for all. Until the day I moved out of my parents house at 19 I shared a bunk bed with my younger brother... it wasn't ideal.

Home ownership is an obsession in this country but home ownership is a luxury, when you have £100,000 of debt you don't really have room for luxuries! I think you'll find that on your income and without debt you'll be very well suited for saving money towards future home ownership and then you guy buy somewhere with only mortgage debt, as long as you start fresh with your finances (no more buying things on credit, always budgeting) you'll be well on your way to being financially prosperous.

Good luck!

Should we sell our house and rent??

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