My house is worth £350,000

Curious_Moose

so I heard a work colleague saying the other week

Which left me wondering, when people talk about debt, do they refer to total assets - total liabilities (i.e. include equity in the house), or only whatever debt they have in respect of loans, credit cards etc?

Someone with £200,000 of equity in their property might worry about a credit card debt of £3,000 whereas many would consider them better off than someone with no debt who cannot afford to get on the property ladder.

Seaxwyn

Hi Curious moose, it's an interesting question and one I often wonder about!

I have probably over £100,000 equity in my house BUT as it's really shabby I would need to decorate it thoroughly, including replacing the doors and windows, to realise its full value. This I cannot afford to do.

Also I would then have to find a new home of equal size for my family.

So my debts of 47k-ish make me feel very oppressed and anxious. Possibly I feel even worse if I didn't have the house, but I can't say I get a huge amount of comfort from the equity.

joeblack066

I have a house with about £15k equity in it at the moment (have only had it 2.5 years, and borrowed 125% on it at the time so I'm happy with the £15k). I have debts of £8.5k but that includes a car on finance, so there is about £4.5k of 'unmanageable' debt that I struggle with at the moment. I do take comfort in the fact that there is equity in my property, and as it is leased out for another 9 years, I look on it as my pension, as it will hopefully have a lot more equity at the end of the lease.

Frugal_Fox

We have about £60,000 equity in our property - and debts of about £12000 now - leaving us £48000 in 'profit' - but we would have to sell to realise this, and then still have to buy another property - and its unrealistic to assume we'd buy a similar property so we would in fact extend our mortgage.

When I talk about debt I refer to all debt, excluding the mortgage and do not take into account assets - mainly because I don't have any apart from the equity as I threw all savings etc at the debt!

HTH
FF

Seaxwyn

me again

Another thing I worry about is that the mortgage we have is easily six times our earnings, and OH and I are both self-employed. The fixed term thingy ends next June and if it goes up lots we won't be able to pay it - we're already struggling to pay interest only. And we probably wouldn't get another mortgage - we were declined last time I tried to remortgage (pre lightbulb moment of course).

So while yes there is some comfort to be had from thinking of the equity, the stress of having a large mortgage is great.

lz544w

I always think of my debts in isolation from the house. Although there must be about £100k of equity in it, selling it to realise that equity and pay off about £37.4k of non-house-related debt just isn't an option, as I'd still need somewhere to live.

Also, my mother lives with me, and between us, we've lived in this house for around 112 years!

chocolatefish

There's the thing that the property developer programmes bang on about, that you can't look at your equity in isolation if you are selling one house and buying another. Unless you are looking at downsizing and buying somewhere considerably cheaper than your present abode, or it's an investment property that you don't live in, it's not necessarily easy to realise money from property.

And there's the trap that many people fall into... sell off house for what looks like a big profit, pay off existing credit card / loan / debt, temporarily get back to an even keel, buy new house with bigger mortgage, want to decorate / furnish / improve said new house, rack up more credit / debts... back to square one with little to show for it. This has happened to some good friends of mine: they were glad to pay off the previous debts, but hadn't learned anything about living within their means because they hadn't actually adjusted their lifestyles at all. So now they have a massive mortgage, and new debt from doing up the new house. And they keep on talking about how much the new house is increasing in value...

"Someone with £200,000 of equity in their property might worry about a credit card debt of £3,000 whereas many would consider them better off than someone with no debt who cannot afford to get on the property ladder."

I'd say your comparing apples and oranges here - not really comparable.

savvykaz

Very interesting thought....

Our house is worth £150,000 and our outstanding mortgage is about £45,000 thus giving us £105,000 equity. Wow I think, this would clear all our debt and still have some left, but we can't downsize (2-bed semi), so where would we go? I don't want to rent as that would be more per month than our mortgage, so we'll just carry on as we are.

Pobby

Thankfully we have a £5k mortgage and about £135k of equity.Mind you as Merve from the BOE says,debt is reality,house prices are a matter of opinion.I do not really think of my house as an asset,it is my savings and investments that matter to me as they are pretty liquid.After all,have to live somewhere.When my business failed I was blessed with getting a very highly paid job{around £50k a year}.So lived life low,my wife was ill and couldn`t work{she is fine now.} We just ripped into the debt and mae it the first priority.Imho house prices here are mad and should not have been allowed to get to this crazy position!

newleaf

A house is only worth what someone is willing to pay you for it, when you wish to sell it. You may or may not realise the full potential price, it often depends on your reason for selling and whether you can wait for the market to go your way. (Speaking as one who lost a shedload of money in negative equity by buying a house in 1990 and needing to sell it in 2000 :rolleyes:)