Sell home and downsize to be debt free? Help!!

greenwoodlad

Just wanting some advice about downsizing? We have a 5 bed detached home in a village 7 miles from the city value 300k - we stretched ourselves to get our dream home in 2008 - mortgage lenders were happy to lend us nearly 5 times our joint income then - we have remortgaged every 2 years on a good fixed rate. But this last year things have got tight - i have a 40k a year job but have lost all my overtime, living costs are increasing weekly as we all know - i have had to take on 2 extra jobs and am working 70 hrs a week - we have 3 children , my wife works part time . last year we stupidly took out an unsecured loan to pay for a new kitchen and i took out a credit card for "emergencies" a credit card that we now have had to rely on to buy food and is now at the limit - if it was not for my part time jobs we would have gone under . We have cut back everything to the bare minimum spend - we don't go out or have a holiday- sometimes we struggle to put food on the table - we work finances out every morning - and live at the overdraft limit . We don't want to sell our dream home but we don't have a life at the moment - we have even sold our car and bought an old banger so we could pay for the heating oil - we cannot go on like this - we don't want to do a DMP as this would affect our credit rating and ability to get good remortgage deals

We have £22,000 of unsecured debt with payments of £600 a month

We are deliberating whether to sell our dream home , we do not want to leave the village and move back to the city and the children are in local schools and have all their friends out here

The house has been valued at £299,000 - we owe £220000 + 22,000 debt + there would be estate agent fees £3500 and solicitors.

We have seen a 3 bed cottage in the village for £200,000 but is is much smaller would be a massive compromise on space also only a yard, no garden but hey we live in the countryside and there is a great park for the kids anyway - we could pay debts off - have 40 k deposit and reduce mortgage to £160k - on paper we would be saving £200 on mortgage, £600 in debt repayments and probably heating fuel etc

Has anyone downsized paid debts off ? It seems like we would be debt free and could enjoy life again or we could sell and rent ? My wife feels selling will be the end of the world as we have been on the property ladder since we were 19 and worked our way up to get this home - but i think we have way overstretched things...

pennies_from_Heaven

Hi there,
Its a massive decision and will takes lots of thinking about, but please look at all your options very carefully before rushing into something because you are panicking.
We sold our property and used the equity to pay off all our debts and now rent. The difference for us is that we hated the village we lived in so it was an easier decision to make.
This leaves us now back in a rented property which is a lovely house, in a far better location, but with a rent of £1000 pcm it will take us ages (if ever) to get back on the property ladder as we are not young.
If I was you I would work out carefully the financial and emotional outcome for each option, i.e. exact fugures, rental figures for where you are living, how much you can afford to take for your property if you get a lower offer etc etc.
Its not easy, but please make sure you are 100% happy with your decision.
We are pleased that we did what we did - but on the flip side its going to be hard to own a place again
From what you have said and with my own experience, I would try to downsize and pay the debts out of the equity.
Only you can make that decision, but please take time over it and try to look at it in a practical way without the panic. :A

ellesbellesxxx

You have to put health and happiness first - if you are working 70+ hours a week then are you even around to enjoy your house?

If that would work out, that sounds amazing... and a fresh start!

Good luck to you!

lynnemcf

What about other options. Can you rent out a room? Do you have anything to sell? What about a second part time job for your wife (ebay, child minding, cleaning)?

tallyhoh

Are there any houses similar to yours that have been sold recently? you can check on zoopla. Just thinking that there may be a difference between valuation & what the actual sale price is.

I know you have looked closely at your budget but why dont you put it on here for more suggestions on cutting back before you actually decide.

I would downsize if you are sure it would clear your debts & you are certain you wouldnt run them up again with a nil balance on your cards etc.

lindsaygalaxy

IMO I think you should sell if it is making you that unhappy, it is only bricks at the end of the day. Are you happier in a house you can't afford or would you be happier in something smaller with no debt, a good car and a family holiday every year? Youre family would also get to see you more.
If that is really not something you want, could your wife work more hours? Could you rent out a room? Are you entitled to any benefits? If you post you SOA people may be able to help a little.
I know you are worried about going on a DMP, but if you are not loooking at moving in the next few years it may with worth discussing with a debt company. My friend has just gone on an IVA due to being in similar position. The house is in negative equity and they didnt really have a choice.

vics199

Could you put your debt onto the mortgage? That way you would only be paying the one mortgage payment? I really don't know much about this other than the bank offered it to me once but I didn't pursue it as it doesn't work for my situation. May be worth looking into and would save you downsizing.

I agree with what others say about posting an SOA to see where you could possibly cut back etc.

josiebabie

vics199 wrote: »

Could you put your debt onto the mortgage? That way you would only be paying the one mortgage payment? I really don't know much about this other than the bank offered it to me once but I didn't pursue it as it doesn't work for my situation. May be worth looking into and would save you downsizing.

Please don't do this, you will turn unsecured debt into secured debt.

Post an SOA for people to look at for you and offer advice.

Good luck!

greenwoodlad

Thanks to all of you for replies :A - i would not consolidate debt onto the mortgage but couldn't anyway as we are at our limit 75% LTV
I posted SOA on her 7 months ago and got some great advice - which we have acted on re shopping / bills etc Since then we had to sell our £5k car as it developed 2 major faults and was going to cost £2900 to repair - we had no choice but to sell it to the garage for spares / repair - it was an 09 plate car !!! they gave us £3k for it as was - so we bought an old car . Also living in a remote village - things like diesel costs / heating oil has doubled in price over the last 3 years - we have paid £640 for a 1000 litres of heating oil on 12th Nov - we have used 3/4 of that in just over 2 months - we only have central heating on when we have to morning & night - the kids have been huddled round the log burner in duvets on some freezing days - yet we have used over £240 a month in heating & hot water as the heating oil is so expensive:(

lindsaygalaxy

My parents live out in the sticks so I understand the price of oil, it is pretty poor. What type of debt is it? Loans/CCs/catalogues? Is your overdraft interest free? Please repost your SOA, people may be able to help. Could you get a loan to consolodate all your debt which you could spread over say 5 years, and reduce the monthly payments?

I guess you have to ask yourself how much you are willing to sacrifise for your dream home? Have you calculated all the selling/buying costs involved in moving to a smaller house? Would it solve that much?

katsu

Would you consider the lodger suggestion? Monday to Friday lodgers would be ideal, but if you are very rural there may not be the interest? We have someone living with us 7 days a week (to help them save) and it really isn't the end of the world.

That said, unless you could let 2 rooms out, I suspect downsizing will make sense unless your wife can bring in more money.

How soon does the loan finish?