Should I sell my house to clear my debts

PenniLess_2

I having hooked on this site for months and the advise given to others has in turned helped me to start sorting out my debt problems. But now I stuck with a dilema and I'm hoping you will be able to help. So to put it a summarised as I can:

My OH lost his job a year ago and decided to start his own business with his settlement money - as you can imagine with a new business he has been taking very little in salary - just £100 a week. The problem is the amount of debt that we had built up in cards and loans - it all seems very manageable until one of you loses an income doesn't it! and how stupid it feels now looking back to have let it get so bad - if only we could wind back time .

We have approximately £70000 in debt - eekk! I have managed to agree payment terms with most, unfortuantely been less successful with others and do now have 3 ccjs. My worry is the lenght of time it is going to take to clear these debts - minimum 15 years using the current payment plan.

My house on the otherhand has approx 90000 equity which could be released if I sell the house and we rent for a bit - Is this sensible? Is it better to stay in the housing market? Life is such a struggle at the moment with money being to tight - all I do is work, work and work and feel that its all on my shoulders as I'm the only earning a proper salary. Is selling the house the easy way out which I will only regret later?

Help - any advice gratefully recieved

thank you

Biffa

Hi PenniLess. Can you post a SOA - showing your debts and your exact income, it will be much easier for us to look at and give you an honest answer and we may see something that you have overlooked. It would be too easy for me to say "Yes, SELL!" but if we know the full facts there may be a way out without having to move house.

Bestthingsinlifearefree

Welcome to MSE:beer:

If your OH is only earning £100 per week from the business maybe he needs to look for a full time "proper" job and fight to clear the debts and keep the house.

Best thing is to post an SOA.

http://forums.moneysavingexpert.com/showthread.html?t=107280

I wish you well.

PenniLess_2

Thanks - more detailed breakdown -


Income - me

£1,877.00
Partner

£435.00

Secured Loan

354.45
Mortgage

850.00
Council Tax

168.00
Repayments of loans

320.00
phone

21.00
gas & electric & water (now on a meter for electric and includes repayments for debt)

100.00
housekeeping (inc. Food, Pescriptions, clothes, haircuts etc etc)

200.00
me fuel (get extra salary to compensate for this - company car)

200

Debts

Cards
BarclayCard

£6,421.00
J Lewis

£5,000.00
AbbeyCard

£4,303.00
Sainsburys Gold Card

£4,250.00
Egg Card

£3,846.00
Marks and Spencers

£2,000.00
HoF

£1,726.00
Next

£1,328.00
Debs

£906.00

Loans
Egg Loan

£6,949.00
Lloyds Loan

£830.00
Black Horse - secured

£11,000.00
DHS

£1,294.58
Loan from company( deposit on house)

£20,000.00

Bestthingsinlifearefree

Hi Penniless,

This is a good start, you may well be having your "light bulb" moment:T

Have you got / could you post the interest rate of those credit cards / loans ?

Now having a quick add up I make your out goings and income about equal on the figures you have given ???

Secondly I would recommend you and your OH both begin a "spending diary" ASAP to find where the money goes.

Do you have sky ? (I did not see that on your SOA)

Do you have mobiles ?

Do you have second car ?

This is just the begining.

Keep up the good work and over the next days, weeks , months on this thread we will turn things around.

Bestthingsinlifearefree

The selling of the house is a big, big, decision.

Lets take this one step at a time. You don't need to make a snap decison.

Lets evaluate all options, look at all angles first.

What is the value of your house and what is the mortgage and what type of mortgage ? (e.g is it capital and interest repayment or interest only)

Is there any redemption penalties e.g if you sell and get out of the mortgage will there be financial penalities incurred for redeeming the mortgage early ?

In your first post you say "my house". Do you mean you and your OH house or is there a separate finances thing going on here ?

Could your OH find a job similar to his old job (i.e increase his income from £400 a month) ??

Has he had his light bulb moment yet ?

Sorry to ask so many questions.

( I will be off home soon but I am sure other MSE'ers will be here to assist and I will be checking in on this thread on Monday, to catch up and see all the good progess you are making.):T )

PenniLess_2

Don't mind questions - pleased to have the help

Bestthingsinlifearefree wrote:

Hi Penniless,

This is a good start, you may well be having your "light bulb" moment:T

Have you got / could you post the interest rate of those credit cards / loans ? - sorry don't have that to hand - but I have defaulted on all cards so does it matter now?

Now having a quick add up I make your out goings and income about equal on the figures you have given ??? - there is about £25 leftover!

Secondly I would recommend you and your OH both begin a "spending diary" ASAP to find where the money goes. - Ok that sounds like a good idea

Do you have sky ? (I did not see that on your SOA) - cancelled it

Do you have mobiles ? - covered by OH business

Do you have second car ? - covered by OH business

This is just the begining.

Keep up the good work and over the next days, weeks , months on this thread we will turn things around.

PenniLess_2

Ok - and for the other queries

Bestthingsinlifearefree wrote:

The selling of the house is a big, big, decision.

Lets take this one step at a time. You don't need to make a snap decison.

Lets evaluate all options, look at all angles first.

What is the value of your house and what is the mortgage and what type of mortgage ? (e.g is it capital and interest repayment or interest only) - house is worth approx £220000, mortgage is repayment is currently £130000 owing

Is there any redemption penalties e.g if you sell and get out of the mortgage will there be financial penalities incurred for redeeming the mortgage early ? - oh hadn't thought about that - I will check

In your first post you say "my house". Do you mean you and your OH house or is there a separate finances thing going on here ? - house is in mine name due to past OH's finanical problems but we both paid the mortgage until recently so our house
Could your OH find a job similar to his old job (i.e increase his income from £400 a month) ?? - He is very keen to give the new business ago - it is increasing its sales month on month - I am worried that if I make him give it up that he will never know if he could of made it work and then would resent me
Has he had his light bulb moment yet ? - not sure! he dosent like to talk about it much
Sorry to ask so many questions. - ask as many as you like - thank you for you interest( I will be off home soon but I am sure other MSE'ers will be here to assist and I will be checking in on this thread on Monday, to catch up and see all the good progess you are making.):T )

- thank you - have a nice weekend

Bestthingsinlifearefree

This is where I am confused, if your income = your out goings (more or less).

why would you need to default on the cards ?

The interest rate is important because you can target spare cash at the highest interest rate debt first ( a technique called snow balling).

OK read your post about your OH business "sales increasing" month on month.

Ok you need to sit down and have a real heart to heart if sales are really increasing, then his income will increase.

You and he need real PROOF / EVIDENCE that the business is improving and his income will improve.

Many people who are self employed are often in denial.

You need to set time scales / to see how soon things will turn in the business.

Maybe get a cheap accountant involved.

Is this loss making business (which it is if it only provides him £400 per month) going to pick up in the next 6 months ??????????????????????????????

You need to have some serious financial heart to hearts with your OH and get him on this board, tackling this project as one team as it is both your financial future stake.

CLAPTON

the key issue here is your OH income
you need to set some sort of timescale (maybe six months?) for the business to either 'make it ' and produce a reasonable income or for OH to get a real job.

although i can't quite work out how much debt is being serviced by the £320 presumably that not the 70,000 (some is being serviced by the secured debt (11,000) presumably ...not clear about the 20,000 from company) but it looks like it will take at least 10 years to pay this off at the current rate... this is not realistic, who can know your situation in 10 years time.

if OH income can rise to a sensible figure in a reasonable time then i'ld be tempted to struggle on as you are but otherwise selling the house seems a realistic solution. You would have to take on board that you have presumably defaulted on your debts and so your creditor record is now awful...this will affect your future ability to get a mortgage at a high street rate.

Bestthingsinlifearefree

Do you really, really need 2 cars, mobile bills ??????

You say the 2nd car / mobile "is covered by the business", lets say they cost the business £500 per month.

If this cost was cut out, the business could then pay out extra in salary e.g upto £900 per month.

See the point I am making ? "covered by the business" does not necessarily answer the qu"

e.g just beacuse the business pays for it does not mean it cannot be cut back on.

what type of business is it ?

(sorry to be nosey but all info helps give good advice)