What would you do.....

mikee31

Family of 4, 2 adults 2 children living in a 2 bedroom house which is now becoming too small as the children get older.

In about £50k of debt, due to numerous things including redundancy and unemployment, and paying back £300 per month via an arrangement with debtors.

Given the debt, and no doubt shockingly bad credit rating, to move house the chances would presumably be slim to none. Now, I could sell the house we live in, which has about £50k of equity, which would pay off the debt and although we could rent, my mortgage is currently £500 per month, whilst suitable properties in our area would charge £1,000 per month.

With the figures stated above nothing seems to jumping out as a solution. Increasing salary or working additional hours is not possible and we have cut back on just about everything using the information from this site.

Does anyone have any advice?

tootsmyboots

Honestly? Stay put and work on the debts. No house is too small as long as you have a roof over your head. Children cope better than we give them credit for. Use bunkbeds to maximise space or swap rooms with them if you have the bigger room. Are they the same gender? If not and you feel as they become older they need to have separate room, you might have to think about using the lounge as your room with a sofa bed. It isnt worth getting in more debt to have more space, especially when you are unlikely to find a rental that you can afford or pass the credit checks for. Again, not trying to be harsh, but your children need you to work on the finances more than they need more space.

Have you been on the DFW forum and looked for ways to reduce your bills etc.

Sorry to hear how frustrated you sound, but I would say work with the space you have and adjust your expectations for what your situation is.

lincroft1710

£300 pcm means, provided debt doesn't increase, it will take you almost 14 years to pay this off. But if you sell the house and pay off the debt you will have £800 pcm for rental.

With 2 children, I would be reluctant to move into permanent rented (as it could be years before you could get back on housing ladder), so if I were in your position I would stay put and put up with cramped accommodation.

The only possible alternative (which may not be feasible) would be sell up and buy in a much, much cheaper area.

CloudCuckooLand

Don't think you have cut back on all the areas that you might...

http://forums.moneysavingexpert.com/showpost.php?p=39221736&postcount=4492

Redo your SOA, you may have overlooked something else.

mikee31

Cloudcuckooland thanks for checking my previous posts.....saddo! :mad: BTW That was paid for by grandparents and doesn't help with the question in hand.

Thanks to the other posters for the sensible and helpful comments.

princeofpounds

It's largely a result of personal preference. The situation is what it is.

You either don't move or you do move and rent. Because your debt offsets your equity your net worth is effectively zero and so you can either 'rent' the current place from your bank or rent a new one from the market.

Don't compare 'suitable' rental properties with your unsuitable current place. They are of course going to be more expensive. The true economic decision between renting and staying with a mortgage will be illustrated by comparable properties. Adding on the extra room is a decision of preference for the extra space.

Bear in mind that whilst rental costs will inflate over time, your mortgage might do so over the medium term too if interest rates rise. So the comparison is artificially flattered by current low rates and you might do better to estimate what it would be for a fixed-rate mortgage which gives an estimation of the average rate over the relevant time period.

It's hard to know your personal situation and preferences enough to give a right decision. When we had friends in a similar situation they erected a dividing wall, leaving two tiny rooms. It wasn't ideal, but it helped them manage for a few more years.

The ironic thing is that you might get a better housing situation on local housing allowance...

poppysarah

Your equity is on current market value? Is it realistic?