Do I sell my home to pay off some debt?

lauren101089 · 9 June 2014 at 9:42PM

Hi, It's the first time I've created a thread so thanks for taking the time to read it :j
I'm in a dilemma.. Do I sell my house to pay off debt?

Myself and my partner both work full time but we're struggling to make ends meat, At the moment i've not got enough money to pay my bills for the month nor do we have any money for food/petrol etc.. its the same old every month.
we bought our house for £138,000 with £7000 deposit.
Todays valuation was £154,950
So I worked it out that IF we were to sell to pay off our mortgage would be £117,000, pay taylor wimpey back their £14,500 interest free loan, solicitors and estate agents fee's approx £3000.

That leaves us with about £20,000 equity, were already on a DMP and pay £80 a month but with the 20k I was thinking of leaving the DMP and instead paying off my car finance (approx £7000) and a loan in my mums name (£11,000) which would free up £445 extra a month which is the saving in monthly payments for paying off debt.

My plan would then be to rent, I currently pay a mortgage of £580 so if we rented for about £500 there's another £80 saving.

Has anyone done this...Any advice? Thanks in advance

MSE update, 15 July 2014: Thanks to lauren101089 for posting her dilemma - we've decided to include it in our weekly email. Please be kind when responding.

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Jack_Johnson_the_acorn · 9 June 2014 at 10:42PM

lauren101089 wrote: »

Hi, It's the first time I've created a thread so thanks for taking the time to read it :j
I'm in a dilemma.. Do I sell my house to pay off debt?

Myself and my partner both work full time but we're struggling to make ends meat, At the moment i've not got enough money to pay my bills for the month nor do we have any money for food/petrol etc.. its the same old every month.
we bought our house for £138,000 with £7000 deposit.
Todays valuation was £154,950
So I worked it out that IF we were to sell to pay off our mortgage would be £117,000, pay taylor wimpey back their £14,500 interest free loan, solicitors and estate agents fee's approx £3000.

That leaves us with about £20,000 equity, were already on a DMP and pay £80 a month but with the 20k I was thinking of leaving the DMP and instead paying off my car finance (approx £7000) and a loan in my mums name (£11,000) which would free up £445 extra a month which is the saving in monthly payments for paying off debt.

My plan would then be to rent, I currently pay a mortgage of £580 so if we rented for about £500 there's another £80 saving.

Has anyone done this...Any advice? Thanks in advance

Sky? Gym memberships? phone contracts? Shopping at Aldi? Bulk cooking? cycle to work? Entitled to any benefits/support?

Annisele · 9 June 2014 at 10:49PM

I'd explore all other options first.

If you don't have enough money for food and petrol, then it's possible that your DMP payments are set at too high a level. Is there any room to renegotiate that? (And is your DMP with somebody who charges? If it is, see if StepChange can help you).

If you sell, then it's unlikely that you'd get another mortgage anytime soon. Private renting can be pretty insecure. If you're unlucky, you can end up moving every six months, with reference fees and removal costs each time. (Having said that, I stayed eight years in my last rental - but worst case has you moving a *lot*).

Was the £155k valuation from an estate agent? Once you're on their books, that could easily turn into a sale of £140k - so check recent sold prices in your area.

HappyMJ · 9 June 2014 at 10:57PM

You got to live somewhere and renting may be just as expensive as your mortgage.

hostie · 9 June 2014 at 11:06PM

Maybe you could remortgage to take some money out of the equity and use it to pay your debts but still keep the house.
As the others say, I would explore all the other options first and look at selling your house as an absolute last resort.

Could you maybe rent your living room out a few nights a month using something like airbnb to get a few more pennies? Or take in a lodger if you have enough space / a dining room or something.

Thrugelmir · 9 June 2014 at 11:06PM

If you've explored every avenue, then yes your suggestion is worth considering. As life simply becomes a hamster wheel that you cannot get off. The stress and strain will undoubtably take a toil on your relationship too. What ever the reasons for the DMP. Make this your lightbulb moment. Don't make the same mistakes ever again. Learn from the experience.

DanceKing_2 · 10 June 2014 at 11:13AM

Shopping at Alidi will halve your food bill which is bound to save you at least £150 a month

Thrugelmir · 10 June 2014 at 1:59PM

DanceKing wrote: »

Shopping at Alidi will halve your food bill which is bound to save you at least £150 a month

Half of zero is zero.

nor do we have any money for food

JuliusCaesar · 15 July 2014 at 11:23PM

You have a loan of £7000 for a car, so it must be worth at least that. Sell your car, pay off your loan, and buy an old but reliable car for under £1000 (or do without a car altogether if you live in a big city).

If possible, remortgage your house and pay off your other debts.

Look for ways of cutting down on expenditure. Don't buy ready meals. Don't buy sandwiches for lunch, but make your own the night before. Don't buy coffee every day, take a flask. Buy clothes in charity shops and at jumble sales.

The actual cost of selling your house and moving is likely to be more costly than you think.

pennypinchUK · 16 July 2014 at 3:23AM

Clearly, this is highly emotive as it involves an asset which is so personal to you, i.e., your home.

If we try to look at this from two angles - your income and your outgoings. You' re saying your income is not sufficient to cover your outgoings. You don't see any chance of your income increasing to cover your outgoings.

Indeed, with mortgages likely to increase as interest rates start to rise back to more normal historical interest rates during the next year, your outgoings are likely to increase further, thus increasing your debt.

As you have already taken action to manage your debts with a debt management plan I'll assume you've already looked at any opportunities to reduce your mortgage, and the loan in your mother's name is another attempt to cover your outgoings.

Regrettably, if you don't see your income increasing, or your outgoings reducing, I don't see any option other than to sell, get yourselves sorted and try to start again. If you don't act soon, you'll have unsustainable debts which will affect your ability to get back on the property ladder.

Good luck to you.

shireknight · 16 July 2014 at 5:34AM

I would fight tooth and nail to keep your house, a house isn't just a house it's also an investment as your opening post already shows "we bought our house for £138,000 with £7000 deposit.Todays valuation was £154,950"

If you turn to renting you may be paying a little less each month but you're also throwing away probably one of the largest investment opportunities of your life, I would struggle now and reap the rewards in the future, if it comes to the crunch then re-mortgage in order to get hold of the equity but don't sell :-)

Do I sell my home to pay off some debt?

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