Living month to month because of huge debt: sell house to get back to 0?

Hillbilly1

As much as the maths makes sense for selling the property, they really MUST get to grips with WHY they are overspending.

We really need a SOA before we can help further. If there have been loans etc can you put the reasons why they were taken out?

I agree with the majority that tryin to stay in the house would be sensible.

gardenlady_2

It really is never better to rent if you already own your own home. I still think you should phone CCCS etc. My understanding is that secured debts cannot be put on a DMP, but the credit card payments could be reduced further in order to give them more of a life.

Really do explore every avenue before selling. I don't think people need to know the reasons behind the loans, and as you say they are down to the bone with spending as it is. They are no longer overspending and are clearly doing very well if they manage on £1000 per month with dependant children!

I wonder if another IVA would be possible, although maybe you can't do that more than once. Didn't the first one clear the debts if they are old ones?

Seanymph

£500 mortgage payment which gains them more equity every month and within 10 years £120,00 in equity (another 50k).

Or £700 rental which nets them nothing at the end of 10 years.

Currently they are treading water - treading water is excellent - it's better than going under!

Why are you so keen to get their house sold?

Because you are 'independent' and you think your siblings would benefit from it equally?

I think your reasoning is flawed, fundamentally - but can't quite work out your motivation...

If your parents do have two 'dependent' children, how old are they? How long until they are independent also?

adebt

Hillbilly1 wrote: »

As much as the maths makes sense for selling the property, they really MUST get to grips with WHY they are overspending.

They are not overspending.

They have £3,000 per month income. They spend £3,000 per month. ~£2,000 is money they owe on their debts. £1,000 per month is what they spend on everything else (food, bills, travel), which is the same as what I (a single male living alone) spends per month, so as far as I know they're doing well.

If they had 0 debt, they would have an extra £2,000 per month to spend -- which would need to also cover housing costs.

Hillbilly1 wrote: »

We really need a SOA before we can help further. If there have been loans etc can you put the reasons why they were taken out?

Working on it, will be done asap.

Seanymph wrote: »

£500 mortgage payment which gains them more equity every month and within 10 years £120,00 in equity (another 50k).

Or £700 rental which nets them nothing at the end of 10 years.

The point is the equity they have now is enough to cover all of their debts.

If they sold the house today for £125,000 they would have enough money to pay off the remainder of the mortgage and all of their other debts.

This would mean every month they would now have £3,000 they could spend however they wanted, instead of £2,000 leaving their account straight away to repay debts.

They could rent a house for £500 per month, spend £1,000 on every other cost and put £1,500 into the bank. Then next month they could do the same, then the month after and so on and so on...

Then in 10 years they would have spent £60,000 on rent and would have £180,000 cash in the bank.

If they don't sell the house and continue to pay down their debts as they are now in 10 years they will have £0 cash, £140,000 equity in their home and £2,000 per month to spend (because no more mortgage).

Both options result in the same net worth (thereabouts), however option #1 (pay debt, keep house) means for the next 10 years they're required to be super careful with their spending, 1 financial problem could mean they lose their home and they have all the stress of living with all this debt hanging over their heads. They also have no money to repair house problems, such as broken heating.

Option #2 would mean that for the next 10 years they have no debt, they have no stress, they have no worries about how they can pay to fix the car if it breaks down, they could go on holiday if they wanted.

Seanymph wrote: »

Currently they are treading water - treading water is excellent - it's better than going under!

And in this metaphor they're one wave away from drowning... surely it's better to be sitting on a boat away from the water than to be in the water?

Seanymph wrote: »

Why are you so keen to get their house sold?

My mother is close to the edge of her sanity, she's spent her entire life dealing with financial problems and I don't particularly want her (and my father) to spend another decade dealing with the same stress. Also my brother wants to go to university once he finished school in a few years, right now he will not be able to because of the cost (my parents earn too much for him to be eligible for financial help).

What I gain from their house sale is the knowledge that they're no longer always stressed, the knowledge that my brother will be able to have some sort of future and that they're not too ashamed to talk to me because they need to ask for money.

Seanymph wrote: »

Because you are 'independent' and you think your siblings would benefit from it equally?

I think your reasoning is flawed, fundamentally - but can't quite work out your motivation...

If your parents do have two 'dependent' children, how old are they? How long until they are independent also?

My brother is 15 and my sister is 20. My sister is working but not earning enough to move out, she's also attending a course to help her gain qualifications to enter into a career (beyond working at a bar) but that's got a few more years left.

My motivation is the same that any child would have: my parents are struggling financially and they're struggling with stress, their relationship is being hurt too and I have an obligation to help them as best as I can.

My parents want to sell the house and pay off their debt and move on from this situation, I'm posting here to try and find out if there is anything they are missing that makes this plan a bad idea.

gardenlady wrote: »

Really do explore every avenue before selling. I don't think people need to know the reasons behind the loans, and as you say they are down to the bone with spending as it is. They are no longer overspending and are clearly doing very well if they manage on £1000 per month with dependant children!

This is why I think it's a good idea for them to sell the house to clear their debts, they are financially responsible now (I'm also helping them start budgeting properly so every single penny is accounted for), they are not spending ridiculous amounts of money (they live on less than I do!) but are struggling because of their past mistakes.

gardenlady wrote: »

I wonder if another IVA would be possible, although maybe you can't do that more than once. Didn't the first one clear the debts if they are old ones?

From what I understand my father and mother had separate debts and joint debts, the separate debts are all resolved now and the IVA was for my fathers own debts that were just in his name. I'll have to find out more when I next talk to them.

Deep_In_Debt

If they were to fall one month behind on their mortgage or secured loans due to a disaster (eg: a pipe burst in the house, which has happened before) they could lose their house, which would leave them without a home and with remaining debts.

Sorry if I'm being a bit dim, but do they not have insurance to cover things like this?

JCS1

darren_clarke wrote: »

some times it is best to go bankrupt and start again, there is a lot less stress, plus, how long will it take to sell the house, if one of them got ill could they survive, as you say they are spending 90%-100% of there wages on debt,

my advice would be to go bankrupt and start again, they might not even have to sell the house, put if they go bankrupt then the receivers will make sure they pay there mortgage and have money to live on,

They are not insolvent so could not go bankrupt. And with that much equity they property would be sold

adebt

Deep_In_Debt wrote: »

If they were to fall one month behind on their mortgage or secured loans due to a disaster (eg: a pipe burst in the house, which has happened before) they could lose their house, which would leave them without a home and with remaining debts.

Sorry if I'm being a bit dim, but do they not have insurance to cover things like this?

I believe last time the insurance only covered some of it, I'm not entirely sure, all I know is that at some point a pipe burst, the floor beneath the bathroom had some structural issues and it caused a financial problem for my parents.

Harbour

I understand the stress your parents' current situation is causing all round. However, if they sell now they will be selling into a depressed market. Ten years down the line they may not be able to buy back in again. Their current situation could be better than the prospect of being tenants in their old age.

dizzyrascal

The problem is (as I see it), you say your parents have never been debt free (or not for a long time anyway). This tells me that they have not really dealt with their issues.
In reality, once they are in a cash rich situation and have disposable income they will spend it and not save it!! That's what people do. It sounds like they have never saved so this will require a total new mindset.
They will need to be disciplined to stick to a budget which I honestly doubt they will do.
Living in debt is awful but it should teach us a few lessons and make us make personal changes. This does not seem to have happened (however much you might want to convince yourself that it has).
I think there are other issues to be addressed here before you sell the house.
BTW we all live with the problem of things going wrong in life. No matter what you plan for, there will always be shocks and unexpected expenses. Everyone has to deal with that.

dizzyrascal

BTW, why do you rent a house with 5 bedrooms and 5 bathrooms?
You sound young so you can't need all that space?
It makes me wonder if this is all about appearances. You seem to be ashamed of where your parents live?
Have they downsized before to pay off debts?
Your sibling can go to university btw but they may have to work part time to make up any shortfall. They should be able to get by on the loans, grants and bursaries that are available with some pt or holiday work.