Selling up to become debt free?

brownedoff_2

Because of an accumulation of events (mostly beyond my control) I am in arrears with my mortgage and have a few other debts too.

I am now thinking of selling my flat which is probably worth about £140,000. If I did this I could be mortgage free and left with a balance of approximately £80,000 which I would use to rent somewhere to live.

I have no idea of how to invest this money to get the best return possible. It would have to be accessible to pay my rent. But I presume I would also have to pay tax?

I’m sure I have other questions, but I think that’s probably enough to be going on with. I’d really appreciate anyone’s advice as to what would be the best way forward on this.

GeorgieFTB

Before you go down the selling route you might want to post your SOA, statement of affairs, depending on your day to day expenses we might be able to help cut them. The link is under http://makesenseofcards.co.uk press the format for MSE button and it will come out all pretty...

If you debts are unsecured a DMP might be your best option, an indepth discussion with an organisation like CCCS or CAB might help you down the right path for you.

Sellinng up is a big step and it might not be required.

Good luck
Gx

brownedoff_2

thanks for that, i'd wondered how people calculated it... so this is what it came up with... its not looking good

Statement of Affairs and Personal Balance Sheet[/b]

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 504.79
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 504.79

Monthly Expense Details
Mortgage................................ 244.8
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 51.33
Council tax............................. 42.77
Electricity............................. 70
Gas..................................... 20
Oil..................................... 0
Water rates............................. 27.37
Telephone (land line)................... 20
Mobile phone............................ 17
TV Licence.............................. 12.37
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 80
Clothing................................ 15
Petrol/diesel........................... 20
Road tax................................ 12
Car Insurance........................... 11.98
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 7.5
Pet insurance/vet bills................. 0
Buildings insurance..................... 13.38
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 685.5


Assets
Cash.................................... 200
House value (Gross)..................... 135000
Shares and bonds........................ 0
Car(s).................................. 450
Other assets............................ 0
Total Assets............................ 135650


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 1869.12..(244.8)....5.83
Total secured & HP debts...... 1869.12...-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
family loan....................2000......0.........0
utility owing..................404.36....20........0
Total unsecured debts..........2404.36...20........-


Monthly Budget Summary
Total monthly income.................... 504.79
Expenses (including HP & secured debts). 685.5
Available for debt repayments........... -180.71
Monthly UNsecured debt repayments....... 20
Amount short for making debt repayments. -200.71

Personal Balance Sheet Summary
Total assets (things you own)........... 135,650
Total HP & Secured debt................. -1,869.12
Total Unsecured debt.................... -2,404.36
Net Assets.............................. 131,376.52


I've not had my flat valued yet, but i think that's a rough estimate of what its worth. Also I've recently changed utility suppliers so have an outstanding bill which I've yet to arrange payments for. I'm going to offer them £20 a month, so I've included that too.

I'm not able to increase my income as i have Scoliosis and am unable to work full time. At the moment i have an ongoing dispute with Working Tax Credits, this has now been going on for nearly 18 months, which is why I'm in this situation.
Also i have in the past applied for DLA but have been turned down as basically i am able to care for my personal needs myself.

I hope this all makes sense and welcome any suggestions?

Tixy

Hi

How much is your total outstanding mortgage?
Is the £1869 the amount of arrears you owe?

If you sold your house how much would it cost you to rent somewhere else?

What is the situation with the tax credits? presumably you should be entitled to tax credits? how many hours do you work a week?
Have you any idea of the likely timescale for getting the situation sorted? have you had any assistance / advice with trying to deal with the tax credit people?

Are you eligible for any other benefits? council tax benefit for example?

How big is your property? would it be at all feasible to have a lodger in the short term to help out until your finances/tax credits are sorted?

Your water bill looks quite high, are you on a meter? if not have you considered having a meter installed?

Your elec looks very high (presumably that doesn't include the arreas you have put in the debt list so is just for current usage?) - is there any particular reason for this? have you looked into switching to a different supplier or a cheaper tariff?

Is a car essential for you? you don't seem to be travelling very far is you are using just £20 a month in petrol. If you didn't have it and used public transport/taxis would this cost more or less than the £54 a month you currently spend on the car?

If you did sell your house and clear £80k then that would perhaps pay for your rent for say 15years. How old are you currently? how might you manage after the money way all used up?

Sorry I know thats throwing lots of questions at you but hopefully might give you some things to think about to help make your decision.

brownedoff_2

I’ll try to answer these in order..

Total outstanding mortgage on my last statement at the end of December was £33861.43 the £1869 is the current arrears although there’s another month elapsed now.

Rents in this area for anything half decent would be around £700 - £800 per month.

In December 2008 I went back to work part time for 16 hours a week after being on long term incapacity benefit for 4 years.
At the time I made a telephone claim for working tax credit. Unfortunately there was a mistake made and unbeknown to me I wasn’t awarded the Disability Element that I should have been entitled to, even though I told them I’d been on the higher rate of long term IB. I did receive the paperwork but as I’d never heard of a Disability Element I didn’t realise it hadn’t been included. Therefore I didn’t dispute it and accepted the amount they said they were going to pay me, this did include the 50+ element which I understood would only be for a year.

A year later in December 2009 all of my payments were stopped! Leaving me on just my part time salary of £500 a month. I telephoned to query this and was told to put it in writing. I did this and to cut a long story short, they eventually replied saying it was my own fault for not telling them in the first place and that I would have to appeal. (Bearing in mind their criteria for appeal has to be within 30 days of the statement) I therefore appealed and explained why my appeal was late. They disallowed it. I then took it to tribunal which was also disallowed. I am now taking it further and the next step is the Adjudicators Office.
I’ve been to the CAB, a solicitor and also to my MP who said that he would write to them on my behalf, but up until now it has had no effect whatsoever. Apparently this has never happened before and no-one seems to know how to deal with it. I’ve sent them proof of my IB and a letter from my consultant, but they just seem to be pushing me from pillar to post. As for timescale.. how long is a piece of string?

I get £4 a week towards my council tax plus the single person discount. I’ve included these in the SOA.

My flat does have 3 bedrooms and I have considered taking a lodger, but to be honest I hate the thought of sharing with a complete stranger. I do realise that this may be a short term solution and have been looking into it. Realistically I could probably charge £350 a month at the most including all bills. But then I would lose my council tax benefit and discount. Also I would expect my utility bills to increase, so am wondering exactly how much profit I would actually make? Its not to say I have discounted the idea altogether.

I do have a water meter and have spoken to people in the same situation as me, their bills are around the same. Although I am on a mission to cut down as much as possible. I have a 5 minute timer on the shower, only use the washing machine twice a week, sometimes just the once. I have a dishwasher, but this also only gets used about twice a week, definitely no more than that. Both of these are on timers and use electric at night on economy 7.

Electricity is a nightmare! I have storage heaters and my flat is on the top floor with a flat roof that has no insulation, during the winter I had no option but to supplement the heating using convector heaters, which is why the bills have been so high.
I have just changed supplier.. My last one wanted to increase payments to over £200 a month! I also have an immersion heater, but only put it on about once a week for about an hour at the lower rate early in the morning. (Actually the thermostat has broken and I can’t afford to get it repaired, so have to be careful not to let it overheat).

I need the car to get to work, also with the Scoliosis I’m unable to walk very far and I’m not on a direct bus route. I don’t go out much but about once a month go to see my brother who lives 30 miles away. I couldn’t do this without the car, so I don’t really see this as an extravagance. I also take my mum shopping a couple of times a month. (She often helps me with my grocery bills, so it has its rewards).

I’m currently 55 and to be honest with all that’s going on at the moment, I don’t dare to think about the future as I can hardly cope with the present. Except to say that mercenary as it may sound, my mum is coming up for 80 and wont be around for ever, so there will be a bit of inheritance coming my way at some point.

Sorry if that was a bit long and drawn out, but that’s how things stand right now.. which is why I’m thinking the best option would be to sell up.

de1amo

what would the 80k buy you?--a 1 bed flat maybe? cheaper than paying rent forever!

brownedoff_2

That has crossed my mind too and i've been looking online. For that money i could only get a 1 bed or studio flat in the worst part of town in a state of disrepair that I wouldn’t be able to afford to do up. I’m depressed enough as it is

I was thinking that if I were to rent, any repairs would be down to the landlord, I’d look for somewhere with decent central heating that didn’t cost an arm and a leg. And also somewhere on the ground. Traipsing up and down 4 flights of stairs with shopping and the Scoliosis isn’t the best case scenario..

It wasn't so bad 8 years ago when i moved here, but the condition has degenerated a lot since then.

HappyMJ

I'd stay where you are. What has the mortgage company done to help? With the amount of equity you have in the property they won't be repossesing for a long time so I'd negotiate with them to decrease the repayments for a while possibly indefinitely. They'll get the money back eventually when the flat is sold.

If you sold to rent you'd have £80,000 in the bank but any means tested benefits you currently get will stop and you'll be paying out much more than now. As you say the rent for a similar place is £700-£800 per month. You'd also have to pay full council tax. I'd say the £80,000 would only last about 5 years till you'd have no more money to pay the rent.

Mikazaru

brownedoff wrote: »

My flat does have 3 bedrooms and I have considered taking a lodger, but to be honest I hate the thought of sharing with a complete stranger. I do realise that this may be a short term solution and have been looking into it. Realistically I could probably charge £350 a month at the most including all bills. But then I would lose my council tax benefit and discount. Also I would expect my utility bills to increase, so am wondering exactly how much profit I would actually make? Its not to say I have discounted the idea altogether.

Under the rent a room scheme you can charge £4250 a year without paying tax. From some calculations on your council tax figures your bill would increase by about £25-£30 a month when losing the council tax benefit and single person discount. Depending on the lodger there may not be a massive increase in the bills. Say you ended up with £250 profit that would cover your shortfall. Short term would it be possible to move into the smallest room and let out the other two just while you get on top of the arrears? Depending where you live there might be people wanting to rent just Monday to Friday.

Tixy

Sound very complex regarding your tax credits, I really hope you managed to get this sorted soon. I would have suggested involving your MP but you obviously had but to little effect.

Just regarding the water do you know how much your actual usage is? I live alone in a 3 bed property and my bills are only around £15 a month (and I have long showers and use the washing machine more than twice as much as you). Now it might be just the price difference based on the area you live but yours does seem quite a bit more, just wondering if there is any possibility you might have a leak you are paying for. Have you tried doing a leak test?

Are you on a repayment mortgage at the moment? have you tried talking to the mortgage company about switching to an interest only mortgage (even if just in the short term). Are you on a fixed rate mortgage? if so when does that finish?

The rent a room option might be something to think about (although I do understand your hesitancy), no chance any friends or friends of friends would be interested in renting from you? might feel better than a complete stranger.

Given the rental prices you have quoted I would try to avoid selling and using your equity for rental if you possibly can, all too soon you would end up spending all the equity and then having nothing.

de1amo

if 80k wont buy in your area have you considered relocating to an area with cheaper decent property?-if your not tied to your locality?--im from bournemouth which is expensive but to keep a roof over my head that i owned i would not hesitate-the erosion of your equity is a serious act when your relatively young!---i have toyed with relocating to norfolk or that way before-it offers good value!