Sell house to pay off debts?

bananah

Hi,
We have a house with about £40k equity in it, and are thinking about selling to release equity and pay off a lot of debt.
We are planning on keeping a large chunk back to buy again later, and hopefully house prices will drop again so that when we do buy we will have a nice deposit.
This would allow us to save so much more money, which at the moment is simply paying off debt - we're going backwards.
There seems to be such a stigma attached to owning a house, and we think this could be a great solution.
Are we missing something?

Thanks

baileysbattlebus

Are you sure you have £40k equity - have you taken into account the current drop in, and continuing to fall prices and have you factored in your EA and solicitors etc.

you might not have as much equity as you think - have you had anyone round to value the house?

Plenty of people have already sold to rent - and are more than happy to wait until the market bottoms before they buy again.

poppysarah

How much debt to you have?

bananah

Yes, I understand - its a rough figure, obviously we will have fees etc, but yes we have had it valued and 35-40k is about right.
We are going to review all of our debt today (sounds strange I know but we have just moved a lot of debt around, and have just married, which added some more debt - so its taking some figuring out), but I would think in total we have about £30k - we aim to pay much of it off - keeping the 'cheapest' ones which we know will be easier to pay off.

pinkshoes

If only you had this thought plan over 12 months ago... I'd say your £40k equity could be more like £20k with price drops (depending where you live of course), and then you'll need money for EA fees, solicitor fees, and then letting agent fees, and a 1.5x Months rent deposit to move into rented house. Would there be enough left over to cover the debt?

Incisor

bananah wrote: »

Yes, I understand - its a rough figure, obviously we will have fees etc, but yes we have had it valued and 35-40k is about right.
We are going to review all of our debt today (sounds strange I know but we have just moved a lot of debt around, and have just married, which added some more debt - so its taking some figuring out), but I would think in total we have about £30k - we aim to pay much of it off - keeping the 'cheapest' ones which we know will be easier to pay off.

I would suggest you go to the Debtfree Wannabee section, post your debt problem there, together with a Statement of Affairs [they will tell you where to go to find out how to do it]. Once they have had a look at your debts over there, come back here and post a link to your Debtfree Wannabee post.

The reason I suggest this approach is that by posting the debt problem, people can get a better picture of your problem. Over here, talking about selling is just looking at one solution to your problem which no one really understands yet.

Mutton_Geoff

Property is a very illiquid asset. The exit/reentry costs mean that it's really not worth it for £40k. As you say you'd be keeping "a large chunk back" then assume your debt is much less than £40k.

Your costs could easily be £10k to get out and back in and if you time the market wrong, you'll lose out.

You'd be much better off living on a tight budget for a while than risking a sale at this time. The "large chunk" would also be at risk from low interest returns and your dipping into it for a holiday etc!

geoffky

if your house is valued at 200k it will probably sell in todays market at 160k

jamesd

First stop after sorting out just what debt you have is restarting your discussion on the debt-free wannabe board.

It's very unlikely that you have so much of a debt problem that it's worth selling your home. Only worth considering that after the other Dfw people have taken a look and you've done things like moving the debts to the cheapest credit cards.

Selling and rebuying later is just so expensive that it's very much more costly than keeping even quite large amounts of debt.

Sealy

With house prices going down I dont think this is a good option unless you're very desparate. Lowering interest rates should hopefully mean cheaper loans to consolidate debts.

Debts can be a huge burden but learn to manage them well and they need not be issues in your life.