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Downsizing to clear debt?

princess*daisy
princess*daisy Posts: 244 Forumite
in House buying, renting & selling
Hi all,

Please be gentle with me as it's my first post on this particular board :)

I'm currently living in a two bed terraced which I bought two years ago for £88k as a FTB and I'm currently £18k in debt through loans and credit cards. It's a real struggle, particularly since I broke up with my ex. I currently have £12k equity in my house if we assume I get what I paid for it (mortgage is currently £76k)

I'm considering selling up and moving into a flat in order to clear my debt. There are flats on the market for around £60k where I live, so even if I sold my house for £80k, I would still have enough to pay off my debts and get my life back!

I just need some advice as to whether a) this seems like a good idea and b) what kinds of costs I would be looking at in terms of selling the house and buying another (e.g. solicitors fees, stamp duty etc).

Any help would be much appreciated. Thanks :) I realise with the housing market still being fairly stagnant it could take a while, but it will take even longer to pay off my debts so I'm prepared to be patient :)
A journey of a thousand miles begins with a single step. Started 15/03/2011.
CC1 - [STRIKE]6380[/STRIKE] 5800 CC2 - [STRIKE]2673[/STRIKE] 2238 Loan - [STRIKE]12172[/STRIKE] 10731 Total - [STRIKE]21225[/STRIKE] 18769 11.5% (£2456) paid :T

Comments

  • Tixy
    Tixy Posts: 31,455 Forumite
    edited 3 October 2012 at 7:36PM
    Just my thoughts

    If you sell at £88k you would have £12k equity. On your new property of £60k you'd need at least £6k deposit -so you'd only end up with around £6k in cash (check if there are early repayment fees on your mortgage). Then after paying moving costs and solicitors fees that could take maybe £2500, so you'd end up with maybe £3500 to put towards your £18k of debt.

    Obviously you'd have a bit smaller mortgage going forward, so would probably be able to put a bit more towards your debts and so pay them off a bit quicker.

    As an alternative - have you considered having a lodger in your current 2 bed property to help your finances a bit as you are?
    A smile enriches those who receive without making poorer those who give
    or "It costs nowt to be nice"
  • princess*daisy
    princess*daisy Posts: 244 Forumite
    Oh yeah, I forgot about a deposit! Doh! Maybe not the best idea then. I have thought about getting a lodger... at present I think it's too soon as I only split up with my ex a month ago, but definitely something I'm considering for after Christmas! Thanks :)
    A journey of a thousand miles begins with a single step. Started 15/03/2011.
    CC1 -     [STRIKE]6380[/STRIKE] 5800 CC2 - [STRIKE]2673[/STRIKE] 2238 Loan - [STRIKE]12172[/STRIKE] 10731 Total - [STRIKE]21225[/STRIKE] 18769 11.5% (£2456) paid :T

  • Upsidedown_Bear
    Upsidedown_Bear Posts: 18,264 Forumite
    10,000 Posts Combo Breaker
    If you did buy a flat you would probably have to pay ground rent and service charge - just something to consider.
  • firesidemaid
    firesidemaid Posts: 2,140 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    as above, i was going to say about the flat costs.

    no brainer re. a lodger and the money is tax free. if you charge £350 a month, that's £4200 per year towards your debts.

    simples:)
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Your debt will hinder your chances of obtaining another mortgage.

    Suggest you sell up. Clear your debts and start afresh.
  • Fire_Fox
    Fire_Fox Posts: 26,026 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Sell up and rent.
    Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️
  • dimbo61
    dimbo61 Posts: 13,727 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Well Princess you need to look at getting a lodger NOW!!! to start getting extra money to clear the debts,
    Cut back on spending CUT up the CC cards
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