Sell Up to Settle Debts?

Beencounting

Hi All

I’ve been lurking and posting on various threads for quite awhile. Light bulb has been on, but for all the effort (or not) the debt has actually increased in the last year for lots of reasons.

Anyway, in the last few days OH has decided that we should sell our house to pay off the debts and rent for a bit. There is probably about K£20 equity in the house and our debts are just over K£30, so we would still be left owing.

To put it in a bit of context: we’re making all our payments every month plus a little bit extra, but we have a very limited lifestyle. I estimate that it would take us about 5 ½ years to pay off all the CCs if we did nothing else.

Has anyone sold up to settle their debts? Was it a good decision? What are other DFWs thoughts on this?

Thanks.

DVardysShadow

If you have equity in a house and can down size, it can work. But if you go into rented, from a modest house, what would you have to rent in order to cut your housing costs? And rents can go up ....

milliemonster

Personally in your situation? if you can manage your payments as you are doing then I wouldn't sell up, you are still going to be in debt and may have to pay higher rent so realistically be no better off anyway.

I understand things are tough at the moment, but in all honesty, this is one of the best ways of learning about paying off debt and sticking to a budget instead of taking the 'easy option', once you've done this, you will never get into debt again as you will really understand the effect paying it all back had on your lifestyle

immoral_angeluk

How much would your rent be?
Would you be entitled to local housing allowance/council tax benefit?
How much would it cost you to sell up? (estate agency fees etc)
Would you possibly for eligible for assistance from local Registered Social Landlords? ie Housing associations, councils.
How much would it cost you to move into rented accomodation? (Rent in advance, deposit, furniture, moving costs, final bills on your current utilities. Also does your council run a help with rent deposits scheme?)
How much would the repayments of the debt leftover be?
How much would your insurance reduce by? (Buildings and contents vs just contents for renting)

Just some things to think about as all will have an affect on what you are able to repay off the debt after you move.. although generally speaking I'd imagine that you would be much better off unless you are eligible for benefits to help with rent, or if you are able to clear all of the debt using the equity.

shirtyman

Hi Beencounting,

My partner and i are in a similar situation, though we reckon we're just on the other side of the equity situation and, fingers crossed, will claw back a few thousand to help on the other side.

We are entering into a DMP in about a month but are fevereshly beavering away on getting our house in saleable condition.

Our situation doesn't fit into the neat and tidy "renting is more expensive" model as championed by most of my friends and some on this forum. It's true owning can, of course, be less expensive then renting, but you know what your financial situation more than any of us.

Anyway, my partner and I have a secured loan on our property, so renting in our area for a similar property would be at the WORST just as expensive was what we are paying now, so if we look around we're undoubtedly going to be paying less in rent. And like I said, we will hopefully be in a position where the sell of our property will release some money to combat our debts (currently 50K unsecured) - though it won't clear everything. As I reckon, we'll end up still oweing 20K on CC.

However, we've taken the decision to start up a Debt Management Plan with PayPlan so we hope all this effort will come together in us being debt free in just a few years.

Everyone's situation is different, and though I've been a lurker on these forums as well, it's rare when someone's story will mirror your own EXACTLY.... and that's an awesome thing! I'm stronger knowing we're not as bad off as some people, and by the fact I think we're handling things better than other people in a better situation. If you done the research and the number crunching, and think that renting in short, medium, or long term works for your circumstances then more power to you and good luck.

~ Shirtyman

Beencounting

Thanks for all your replies.

DVardysShadow – I’ve had a quick look at the rental market and we could probably rent something acceptable for the equivalent of our current mortgage payments. This is because pre-MSE/LBM days we released equity to consolidate….we’ve learned our lesson on this…:(

You’re right about the potential for higher rent payments, I’ll need to factor this in to any calculations.

Milliemonster – I agree with this. On balance I think I’d like to continue the DF ‘journey’, but I can see where OH is coming from. Part of the reason for posting was to get a range of thoughts and opinions from other MSEers to help us make an educated decision.

Immoral_angeluk – as mentioned above, I think we could find something within our price bracket. We wouldn’t be eligible for any benefits though as we both work full time and earn ‘decent’ salaries. Your list of items that we’ll need to consider is very useful (I hadn’t thought about insurance).

The intention would be to continue paying the balance of the debt at the current rate that we repay in order to clear it asap, so I wouldn’t expect any change in our standard of living for around a year to eighteen months after making the move.

Shirtyman – You’re right, finding someone in the same/similar situation is awesome. It’s a very difficult decision to make and I find hearing from others helps me get my thoughts together. Like you, we will have to spend some time putting the house in a saleable condition, so any move isn’t imminent, but if we go ahead, will be this year. Good luck with your plans, please let me know how you get on.

Thanks to you all for taking the time to respond, it’s really appreciated. If there are any other opinions out there, please post.

Been

handyman123_2

Hi Beencounting,
Stick with it mate, selling up is no option. Take it from someone who lives in tied accomodation. A few years ago My OH and me took a Job with a house provided. I wont say that working for landed gentry isnt a bit like Monarch of the Glen. And we have had the oppurtunity to stay in some wonderfull places. But now my OH is to ill to work and as the job is for a couple we are expecting the heave ho sometime soon.

We have been looking at renting houses but to find someting decent the cost is way above what we can afford. If we move somewhere cheaper the removal costs are going to cripple us and I doubt if I will pass a credit check if the landlord is using a letting agency.

What I am saying mate is if you have a place of your own fight to keep it.
I wish I still had. I am shure that with the help of the MSE's you will find a way to make your situation beter.

Best wishes Handyman123.

Beencounting

Thanks for posting Handyman123. I hadn’t considered the possibility of a letting agent carrying out a credit check for their landlords. TBH I’m not sure how we would fair in that situation given the level of debt we have, so another thing to think about.

I’m sorry to hear about your situation and hope things improve for you and your OH.

Best wishes.

Been