debt clearing advice please..

Lucysauntie

Hi
I am in a bit of a dilemma and need some advice if anyone can offer any insight. I need to move house to be closer to work and my family, my commute has become to much and I feel socially isolated where I am. I have huge debts (around 45k) and am currently in a DMP. I am considering selling my house and paying my debts off ( house being valued later, hoping the equity will cover the debt). I would then need to rent in a new location as I don't think I would get another mortgage and also house prices are higher. If I only had rent to pay I could then save for another deposit. My question is this - is it a really bad idea to step of the property ladder at this stage?? I am scared of not having something that is "mine" but at the same time moving and clearing my debt is so appealing. Is it possible to get a new mortgage when your credit rating is rubbish?
Any thoughts would be gratefully received.

bottleofred

Hi Luciesauntie,

The decision regarding selling your home to clear the debt and then renting is only something you can decide really. You have said you are on a DMP and although I don't know what state your credit file is in, if you have a few defaults, it is usually possible to get a mortgage, although the interest rate will normally be higher. Like everything else though, defaults leave your credit file after 6 years, so perhaps if you decided to sell, clear the debts and save for 6 years, you may be in a stronger financial position. If however you have CCJs, I'm not sure what way that would affect you regarding future mortgage applications etc. Good luck with whatever you decide and hopefully someone with more knowledge than me will be along soon.

Lucysauntie

Thanks bottleofred. Its a scary uncertin time for me in many ways and I'm scared of doing the wrong thing I suppose. But it will all work out I suppose one way or another! Thanks again

Darnit_2

How long is the DMP likely to take to pay off? Do you find it affordable right now on the amounts?

Lucysauntie

It is affordable but only just, I never have any spare cash and its going to take years to pay off. The estate agent has been and the news isn't great but the equity might just pay off the debt if some of the creditors will accept a reduced full and final settlement. I'm scared of giving up my mortgage though now. Another question - if I sell my house for 165 and buy another for 165, how easy is it to transfer the mortgage? Moving closer to work would save me a fortune in petrol so I would have more disposable income and still continue with the DMP. With poor credit rating would it be considered? I will also post this on the mortgage thread. Thanks

Hannah_10

Lots of people have done this and felt a lot better for it, it's a topic that comes up from time to time so doing a forum search might be worth a go. It basically depends how inportant home ownership is to you. Many people have found it brings no real tangible benefits and they're better off renting and letting someone else pay the plumber. Is home ownership worth the unhappy lifestyle you currently have? As Red says you could use the 6 years your credit rating takes to bounce back to save heavily (which is something you can do flexibly to suit you) and when you've paid your debts they will show on your file as satisfied which makes you look better. Getting another mortgage is possible even with CCJ's, there was an article about the return of the sub-prime mortgage on the main site a week or two ago. The longer you save for though the smaller mortgage you would need, thus saving yourself a bit of interest.

On the down side, you will no longer own a house. This must be a down side because people worry about it but I struggle to come up with any reason why this is worth continuing to be unhappy with your lifestyle. I will leave that to someone else to discuss.

You have one life and it's short. Too short to be unhappy methinks. In your shoes I would opt for freedom and a better lifestyle over the bragging-rights of home ownership.

Crinz

A common misconception but you can not 'move a mortgage'. A mortgage is secured on a specific property. When you move home you have to pay off your existing mortgage and apply for a new one.

Risk is assessed at this stage and it doesnt sound like you would pass the checks at most big lenders.

Lucysauntie

Thanks for the responses. Hannah_10, you are right in so many ways but its the security of having my own place that I will miss as well as being able to do what I what with it etc. But based on what Crinz has said Ithink my options are now limited to 2 so that should make it easier!