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Sell house to clear debt??

Advice needed please! But first....

My Wife and I started a DMP with CCCS 5 years ago. We owed £100000. Not a typo, a hundred grand! About 70k of it on credit cards!!!:mad:

We've managed to pay off half of the debt by now. Oh, and had two kids, and paid for a new kitchen and a new roof...

The DMP has saved our lives - we were paying for the weekly shop on credit cards with an interest rate of about 18%. We were in such terror that we didn't know where to turn. For all of you who are scared now, don't be. A DMP can give you a future.

However....it's not all gravy - we need to move house because of the kids and there seems to be no hope of getting a mortgage. It's frustrating as we have aboyt 40-50k of equity in our house and we've worked hard and now earn about 100k between us so we should be in a pover osition to buy, but the mortgage provider we've had for 10 years (with no missed payments) laughed when we asked if we could get a new mortgage.

Anyway...here's our idea...please advise if it's stupid....

We might sell our house (it's a little terrace, in an area going a bit downhill and it's probably gone down a bit in value over the last few years) and use the equity to clear our debts. We'll then need to rent and try to save. Renting a house that's better than what we've got won't be cheap and I'm scared of getting off the property ladder but I don't want to spend another 5 years paying the debt and then waiting another 6 years to get a decent credit rating....Is this an awful idea???

Thanks in advance folks, and thanks Martin Lewis. Without you we wouldn't have known about DMPs and without that route out of debt we might have split up and not had two beautiful little girls. It's life changing. Don't be scared. Take a deep breath and take that journey walking away from the parasitic banks.

Comments

  • Have you been to a mortgage broker or independant financial adviser that deals in subprime mortgages? Yes you may not be able to get a mortgage with your current bank, but that doesn't neccesarily prevent you getting a mortgage full stop...
    It's a difficult one as I can see the benefits of both, but only you can decide whether you want to give up being on the property ladder to repay your debts!
    Total 'Failed Business' Debt £29,043
    Que sera, sera. <3
  • I'm scared of getting off the property ladder

    Why are you scared of getting off the property ladder when prices are continuing to fall?

    Rent a place and let the landlord take the losses

    Concentrate on getting yourself into a good position to take advantage of any upturn in property values as and when and if the market begins to turn

    But don't deal with letting agencies, except maybe just to find a place - you need to have a one-to-one relationship with your landlord
  • We are in the process of doing just that, after lot of soul searching we decided to put our house on the market, and now have sale agreed in the first week of it going on the market!

    The sale is curently in the hands of the solicitors. We are planning to rent, and will have paid off all credit with the equity we have, to be left with about 25k.
    We have seen a few lovely rental properties better than our own, and should be left with around £800 per month to save on top of the equity, and thats with money for treats, days out and a good grocery allowance!
    It took me a long time to get my head around it, but after another 5 years we should have enough to put down on another house if we feel like it, and hopefully after many hard lessons learned will continue to be debt free.
    We have spent a long time struggling and having nothing left at the end of each month, so it will come as a bit of shock to be debt free!
    Good luck, and I hope you make a decision that is right for you!

    Pennies x
    :A
    LBM 1.1.16 = £27096.59 - now £17,020.38

    Paydbx 2017 - £3588.90/£7000 = 51.27% - number 74

    Paydbx 2016 - £6487.31/£7000 = 92.67% - number 74
  • Hi, I did this 5 years ago after splitting with my ex. It was a 'stop the world I want to get off' moment for me. My credit rating had been trashed and I needed to clear the credit cards and overdraft which together had equaled just under £30k. Also had a tax bill to pay of approx £12k. There was some equity left over which I invested.

    The relief of clearing that stuff was immense, don't underestimate the emotional value of being debt free.

    I was lucky to find a nice place to rent where we've been now for 5 years this May so it's been a settled time and I've been able to save more.

    Later this year I'm hoping to get back on the ladder with a small place just big enough for me and my son and the mortgage payments should be less than the rent I'm paying at the moment.

    5 years seems a long time but I can tell you that now I'm at the other end it doesn't seem so bad and as the house prices have fallen in that time I don't feel like I've lost out.

    Good Luck whatever decision you make.
    Debt Free 🍾 since 6.8.13 £31,997
    Saving for 🎄 🎁 2025 £460/£800 57%
    6 mth 🆘 fund £6k
    Mortgage offset fund £24.7k/£40.3k 61.3%
    It turns out the answer to my problems wasn’t at the bottom of this tub of ice-cream, 🍨 but the important thing is that I tried...
  • That is a very hard decision to make, and only you can make that call. Not very constructive I know but didnt just want to cut and run.
    TOTAL AT START £13606.90 27/03/2018
    TOTAL CURRENT £13445.90 29/03/2018
  • natlie
    natlie Posts: 1,707 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Hi
    I would say yes sell, I am in starter home with 3 kids our house is tiny but my debt is now going and I only owe 60k on mortgage. I would love to get a bigger place but mortgage co said no to us too. Rent on the houses we are looking at is double what im paying now so its not worth it for me I can save better here. It would help you so much to have the debt paid off - its really scary though so have a really good think about it - good luck
    Nat
    DMP 2021-2024: £30,668 £0 🥳

    Current debt: £7823.62 7720.52 7417.94
  • endora
    endora Posts: 226 Forumite
    Fair enough to sell the house for lifestyle or family reasons, however, selling or remortgaging property just to clear unsecured, non-priority debts such as credit cards or loans is never recommended.
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