Sell house to clear debts?

Wordsmith

I have a house worth 155K with a 127K (repayment) mortgage on it. The tenants are brilliant, but the rent does not cover the mortgage – at the moment I add £100 to the rental income, but not so long ago I was adding more like £300 every month.

The property I have abroad has no mortgage on it, but it is not habitable (I live in a mobile home on the site - OK but not sustainable for a variety of reasons). I have £44,000 worth of debts on credit cards/unsecured loans. I would sell the property abroad to pay off these debts, but from the market here I believe I would have very little prospect of selling it in its current state – it is perhaps “worth” 50K and is not mortgageable. I cannot at the moment afford to do any work on it.

The tenants in the 155K house are interested in buying it. They had it valued at 160K, but have said that they will not offer this much for it. I have had it valued at 155K. Realistically, I doubt I could get over 155K for it.

Pros for selling the property:
1. I have a ready buyer (they have already found out that they will be able to get a mortgage).
2. The proceeds from the sale will help to reduce my unsecured debts, but will not clear them by a long way. However, a big debt (the mortgage) will be gone.
3. The tenants I believe would be long-term if they didn’t buy, because I know they love the house and the area. On the other hand, if they did move out, I have to find the money to pay the mortgage while the property is empty.
4. I will not have to worry about possible future bills, e.g. a new boiler (a real possibility).
5. I am self-employed and cannot guarantee earnings to put towards the mortgage and other debts.

Cons for selling the property:
1. If I ever want to return to the UK, I will never, ever, be able to afford a similar house again. It is an ex council house and so not particularly attractive, but I love it and it has a big garden. I doubt that now I would even be able to start again with house buying in the UK - I have spent years getting to this point and don't want to lose it.
2. The house is in lieu of a pension as I have no other provision.

I am working hard at other DFW ways to clear my non-mortgage debts, but they are not reducing fast. My instinct is not to sell the house as I feel I have too much to lose, but I don't know whether I am allowing emotions to get in the way of good sense.

Is the long-term investment worth the struggle of paying off other debts (and I would still be left with debts even if I did sell)? What would you good peeps advise? Sell, or not sell?

boredofbeingathome

Hi Wordsmith. It is a difficult one isn't it?

If your gut instinct is to hang onto it, then i would hang onto it. However you rightly point out about the pitfalls of property ownership and if the tenants move out would you be able to find the mortgage repayments?

Re- the pension bit. How exactly would you fund it? By equity release? You need to think about this one.

I would pose the question on the House price board and guage their opinion about it.

Wordsmith

Thanks for responding BOB. I put the question on the House Buying, Selling and Renting board a couple of weeks ago, but no one replied.

Re pension: it will be an asset I can sell, or one from which I can raise an income by letting.

Lakey

I would really consider selling to your tennants if that is a goer. It sounds like they are sniffing for a house to buy, let it be yours. Once they have gone you'll have all the hassle of finding new tennants etc.
At least if you sell now, you can set yourself free. Tell me why would you consider coming back to this godforsaken place.
Stay out there in the sun my friend!:beer:

Wordsmith

If I was in the sun I may take your advice. As it is, I'm in the Republic of Ireland! But I do see what you are saying about the tenants - and that's why I am in two minds.

poorandindenial

Hi wordsmith

I personally say sell!! How much interest are you paying each month on the mortgage?? That is how much owning the house is costing you and taking away from the amount you could be clearing off your debts and then saving. Like you say, it would take away the worry of something happening, like the boiler going or you needing to find new tennants.

Although I personally don't feel any compulsion to 'own' a house so I may be a bit biased.

50broke

HI
I would sell house and offer full and final payments for 50% of unsecured debts and have bit of cash left for myself.....also if you sell privately there will be no hips or solicitors fees.....good luck