Selling up to be debt free!

lolamosschops_2

Ok, this is probably going to sound a little lighthearted but believe me I have agonised over this, long and hard. The purpose of this thread is to invite people to make suggestions and offer advice on our current situation and decisions, this way any potential pitfalls may be identified and dealt with.
If you care to read my original thread you will see that we are in debt, around 65k unsecured. we have experienced a drastic drop in income as the business my DH was employed by has gone to the wall. He has combated this by setting up his own business, without debt and is bringing in around 600 pounds a month as it develops, mainly in small contacts so its not the end of the word if he loses a percentage at renewal time and he is developing new contracts all the time.
The vultures are circling and although they have all accepted the DMP for now it will take 15 years to pay off our debts at the current rate. To put it into a nutshell the thought of scrimping for the next 15 years is just awful.
So here is the plan, our home is worth about 240k and we have a mortgage of 132k, currently on interest only at 630 a month no arrears. this leaves about 108k in equity. My thoughts are sell up, go into rented accommodation - offer all vultures F&F settlements stick the remainder in the bank and in 5 years when credit rating improves see if it is worth stepping back on to the property ladder.
current income,
my income = 1300 a month + DH income = 600+ Child allowance = 80 and WFTC = 100 Total 2080.

Projected outgoings 600 rent (or less), 100 gas/elec, 50 water, 120 council tax, phones and insurances and car tax = another 250 which leaves 960 for everything else so i think its a goer.
questions for consideration are what do people think of the plan, what are people opinions on F & F, how hard is it to rent with a knackered credit rating and anything else anyone wants to chip in that we may not have considered.

Thanks for listening, well reading really and feel free to suggest away:D

fiscalfool

I completely agree with your sentiments. Having 10+ years of DMP is very daunting. An IVA would resolve the debts, but would require you to either sell up or remortgage.

Have you considered trying to remortgage? A 75% LTV mortgage on 240k will be 180k, paying off 48k of your debt. Might that be an answer?

Otherwise I would applaud your plan to clear everything, rent and start afresh.

NorthernLas

Lola - I can appreciate what a difficult decision this must be.

Some thoughts:
- do you pay a company to manage your DMP? If you are, you should look at CCCS, National Debtline, Payplan as they will do this for free. This will mean that ALL of your money will go to paying your debt.
- is it likely that your income will improve in the next few years ... there are lots of suggestions for doing this. This will give you a cushion to live or to save for F&F.
- have you already got defaults (apart from the set-aside that is on going). If you have, I think it will do you no harm to request CCAs. You may find that the credit cards/loans if taken out before 2007 are not enforceable. It is your decision as to whether you pay, but knowing will improve your chances of lower F&F, especially if they are with DCAs. Have a look at the first few pages of the un-enforceability thread (to check on the process and when defaults are applied).
- if you are thinking of selling up, are there things in your house that you could sell?

You could do most of these, even if you decide to sell up. Maybe this will help to reduce your worry about the vultures.

loopylu36

lolamosschops wrote: »

Ok, this is probably going to sound a little lighthearted but believe me I have agonised over this, long and hard. The purpose of this thread is to invite people to make suggestions and offer advice on our current situation and decisions, this way any potential pitfalls may be identified and dealt with.
If you care to read my original thread you will see that we are in debt, around 65k unsecured. we have experienced a drastic drop in income as the business my DH was employed by has gone to the wall. He has combated this by setting up his own business, without debt and is bringing in around 600 pounds a month as it develops, mainly in small contacts so its not the end of the word if he loses a percentage at renewal time and he is developing new contracts all the time.
The vultures are circling and although they have all accepted the DMP for now it will take 15 years to pay off our debts at the current rate. To put it into a nutshell the thought of scrimping for the next 15 years is just awful.
So here is the plan, our home is worth about 240k and we have a mortgage of 132k, currently on interest only at 630 a month no arrears. this leaves about 108k in equity. My thoughts are sell up, go into rented accommodation - offer all vultures F&F settlements stick the remainder in the bank and in 5 years when credit rating improves see if it is worth stepping back on to the property ladder.
current income,
my income = 1300 a month + DH income = 600+ Child allowance = 80 and WFTC = 100 Total 2080.

Projected outgoings 600 rent (or less), 100 gas/elec, 50 water, 120 council tax, phones and insurances and car tax = another 250 which leaves 960 for everything else so i think its a goer.
questions for consideration are what do people think of the plan, what are people opinions on F & F, how hard is it to rent with a knackered credit rating and anything else anyone wants to chip in that we may not have considered.

Thanks for listening, well reading really and feel free to suggest away:D

Hello,

I have considered selling my house in order to offer full and final settlements but have ultimately decided against it. We actually don't have a lot of equity and would only raise enough to settle on a full and final settlement of about 25% of our debts if we sold. My situation is slightly different in that we are on a repayment mortgage and all I can think is that in 20 years time, I will own outright a house worth (hopefully) about £250-300k. I have horrendous debts at the moment but the thought of owing my house outright one day spurs me on. I am 39 and my husband is 37 and I am currently at uni. If we sold now, it would be 5 years or more before we get on the housing ladder again and then another 25 years on top of that before the house would be ours and we would both be nearly 70 by then (as opposed to late 50's if we continue with current mortgage). My ultimate plan is that when I graduate and hopefully get a good job, we can start to offer full and finals one by one. This will be about 5 years after we first got into trouble, so I think at that stage, the DCA'a are likely to settle after 5 years of getting peanuts.

As for scrimping and saving for the next 15 years, I guess it depends on whether you think long term or short term. We live ok, although every time i spend some money, I have to constantly recalculate in my head if there's enough left for the rest of the month, but overall we don't do too badly (bottles of wine still go in the shopping ). The think about renting also is that you're never really settled, you never know when the landlord might sell up and you have to move. No matter what creditors may say, they can't take my house away from me, and in uncertain times, I find the security of my own home (the englishman/women and their castle and all that!) very comforting.

Hope that helps x

lolamosschops_2

Hi all, and thank you all for taking the time to respond, It really was a hard decision to make, this is the house I was born in and the one I was raised in and when my parents passed away I inherited it. It needed an awful lot spending on it though and there were some legal issues to take car of hence the mortgage. I struggled with the concept of our situation for months really but i knew something had to be done when I was sat at work pondering over a query and a really dark though crossed my mind along the lines of "i wonder how many pills it would take". That is just not me at all and later that night I sobbed and sobbed and sobbed, I dont think my family had ever seen me in such a state but when it was all over and I had no more tears to cry I realised I could let this carry on or I could take back some control and plan for a future. Yes I will be sad to leave, and yes I will be facing a future without a home to call my own but at least I might have my sanity back. I will be 44 in a few weeks and the though of not being able to save for a holiday for 10 to 15 years is just no go for me I am afraid. Life is to short and I want to live while I can.
Please continue to offer you thoughts thou as its all good - I am sure others a thinking along the same lines and maybe it will help more than just little old me.

theoretica

Is the mortgage portable? If you want to stay on the property ladder could you find a house you would be happy with for 170k? I don't know if you can port a mortgage without a repeat credit check, but it might be worth investigating if the idea appeals.

mummytofour

The thing is a dmp would reduce your out goings and would would be able to find some money within you budget for a holiday, trust me. The cccs budget I have gives me far more than I need for food, so I save this and other little amounts and manage days out and holidays.

What if your debts are not causing your depressive type mood and you are down but using the money situation as the reason for feeling that way?

Personally having been homeless in the past and ended up living in a hostel I would always try and hang on to my home. I need stability and a place of my own.

Could you try a DMP? Give it a yr and see how it pans out? It could take you that long to move anyway...

Good luck with whatever you decide.

Spirit_2

Lola

My advice is to really take stock about what is important.

You inherited a home but have managed to accumulate £65K+£132K of debt and mortgage, but your fretting about how/when you will next afford a holiday.

This does not sound like a light bulb moment. What are your plans for the balance of the equity . A safety net or a spending spree?

Selling up may be the right option, but you need to be clear on your goals and priorities.

Good Luck

lolamosschops_2

Fair point Spirit and if it was as simple as that I would agree with you, however I would love to say that the amount of debt has been caused by living wildly beyond our means, a lot of it has started simply, and as a direct result of bad advice.
We are quite simply a family of 3 who have enjoyed 1 foreign holiday a year (a week in a 3* in mallorca in september) who have hung on to a house that is simply too expensive to run for 14 years, factor in 3 redundancies (with no payout) and the cost of childcare when you have no family, a complete rewire, new roof, new kitchen (less than 5K) and a new bathroom (less than 2k) then when you add in the fact that my husbands Ex business partner stole all the profit from the business before doing a runner = no expenses paid and 6 months without income. Add into that mix that as soon as the CC Companies knew we were struggling all of a sudden the rates went from 0% to 25%+ more than trebling our payments it is a little clearer to see. Yes we have been stupid sometimes and paid for the occasional meal out on CC but other than that we do very little that costs money. My Credit cards ( or do I mean DEBT cards) are shredded and If I never see another one again I will be happy - I just want to be able to live within my means and save up for the things we can afford as a family. I think my lightbulb moment is well and truly shining brightly. I really do appreciate what you say, when it is written as simply as that £197k of debt is huge and it certainly could be assumed that I prize my holidays above all else but when I explain that I lost my parents before they were 60, you can perhaps understand why I want to be able to live while I am still around to do that (i am in my mid 40s).

Please don't misunderstand my response as anything other than offering an explanation to your self and others who have assumed the same or similar. I am always grateful that anyone has taken the time to respond and provide help, advice and guidance.

Oh and to answer your question about the balance of the equity we have thought whilst the interest rate is as low as it is at the moment we may invest 50/50 split between safe building society and the other in premium bonds. But again any suggestions welcome!