High debt. Sell garden, get mortgage? Find advice? Help needed!!!!

matesalka

Hi, new poster here so please be kind!!!!

This is my current situation:

I have a high level of personal debt around £ 42000. All credit cards and overdrafts. I don't have a good credit history. No CCJ's but have been late on some credit card payments but I am not in arrears. I am servicing the debt. Just.

I own my own house and another house outright. Full equity. One house is worth around £ 1 200 000 and the other £ 500 000. The larger house is divided into two. Both are rented out. The small part brings me an income of around £ 18900 and the larger part an income of £ 30 000. However the larger part if refurbished would bring me in a much higher income. Around £ 72 000 minimum. But I would need to spend around £ 25 000 to get it to a standard to bring in that type of income.

I have another small income from a business of about £ 10 000. I really would like to be able to raise the money to clear my debts and find the funds to do up the house. How would I go about this? Could I get a mortgage as I don't have a great credit history? Can you get a mortgage if you don't actually want to buy a house? Is it wise to get secured debt to pay off unsecured debt?

Another option is that part of my garden has development potential. I got some estate agents in and they said it would be worth around £ 200 000. Should I sell? DH says I should sell but I don't want to make any rash decisions that I may later regret.

Where can I go to get financial advice? I have looked into IFA's but I believe that they are more for investment products. I just want to get advice on what my options are and what the best way forward is. DH is really pressurizing me to sell part of garden but I want to make the right decision!

I know it seems like I have a lot of equity, but you can't eat bricks and I feel that the house is just not reaching its potential when I could be getting such a better income if I could raise the funds to refurbish the house. I also really want to clear my debts to increase my quality of life

Any advice?

Thanks

DebtFree14_2

You have lots of options here!

I personally would remortgage one of the house you own outright for approx £75000. Use the money to refurb the house to gain extra income and pay off your loans

You have good money in your assets and should get a mortgage with ease. Your income from renting your houses and other job will be more then enough to pay the mortgage and you can overpay when you have surplus cash. I imagine your credit card and overdraft debt will be incurring stupid interest so remortgaging will mean one rate of interest and one monthly payment

Hope this helps

longtermplanner

You should be able to get a BTL mortgage on the larger house. The money from this can be used to do up the houses and pay off your debts. The cost of the BTL mortgage may be offsetable against your rental income but you would need to take professional advice on this.

dealer_wins

I have to ask with that level of income and no mortgage payments, how have you managed to get into debt.

You need to look at your spending and cut back a bit!!

jumperjohn

dealerwins: Debt is relative.

OP: I think to make any helpful assessment then you may need to supply some 'debt' information, ingoings and outgoings etc. There's an SOA link somewhere to help you to look at your income and expenditure and to help you to see where a problem area is, it should help you to see where or if you can cut back on certain things.

Poppops

dealer_wins wrote: »

I have to ask with that level of income and no mortgage payments, how have you managed to get into debt.

You need to look at your spending and cut back a bit!!

And this adds value to the thread because.......

Oh no. That's right. It doesn't.

bigadaj

Poppops wrote: »

And this adds value to the thread because.......

Oh no. That's right. It doesn't.

Dealer wins point was perfectly pertinent.

One thing the OP has to do is to make a decision as to how to raise the money to pay off debt but is in the fortunate position of being asset rich and so being easily able to afford to do this, not the case for many who post on these boards.

However the OP also has to make a decision about their spending, as whilst they are asset rich they are spending more than they earn. So options are to increase income, cut spending or improve the properties for a higher yield, potentially using a buy to let mortgage which would be dependent on rental income rather than the OPs income and credit record which don't appear great.

I'm not sure how the house values and rental incomes are related, to me it's unclear, but the yield appears to be very low, I might be tempted to sell the let property as to me it doesn't appear to be generating enough income.

Poppops

bigadaj wrote: »

Dealer wins point was perfectly pertinent.

One thing the OP has to do is to make a decision as to how to raise the money to pay off debt but is in the fortunate position of being asset rich and so being easily able to afford to do this, not the case for many who post on these boards.

However the OP also has to make a decision about their spending, as whilst they are asset rich they are spending more than they earn. So options are to increase income, cut spending or improve the properties for a higher yield, potentially using a buy to let mortgage which would be dependent on rental income rather than the OPs income and credit record which don't appear great.

I'm not sure how the house values and rental incomes are related, to me it's unclear, but the yield appears to be very low, I might be tempted to sell the let property as to me it doesn't appear to be generating enough income.

It wasn't pertinent.

Didn't 'have to ask' at all. Wanted to ask.

bigadaj

Poppops wrote: »

It wasn't pertinent.

Didn't 'have to ask' at all. Wanted to ask.

Now youre just sulking and being petulant, you won't get very far in life if you can't accept soemone may have a different opinion from t one that you hold, and can't accept any criticism.

claire21

If you sold the garden what affect would this have on the value of the actual house?

My father years ago sold part of our garden for development as the amount received from the sale of the land far outweighed the loss on the house price, the gardens were big enough to loose a slice and still retain land that fitted the property size. It's just when property's are expensive land quite often required with it.

I think it makes great sense to spend the 25k to increase your income by that much, who wouldn't invest 25k to see that jump in return.

I'm sure you would feel much better with your debts cleared and a lump sum left over to invest. An income of somewhere over 100k a year, no debts, should equal a stress free life. Sometimes we hang on to things (like the land) for the wrong reasons (a possible guess is you may have inherited the assets) life is short make it work for you now.

matesalka

Thanks for all your replies. My dilemma is do I sell the part of the garden or not. I have only recently come into possession of the rental property. It was a property I have inherited. My family home. I don't want to sell it. I want to pass it onto my children.

I called in a few estate agents and they actually told me that cutting the garden in half would not effect the value of the house as it is in a prime location in London with excellent transport links and the house has a very big garden so there would still be plenty of garden for the house.

The thing is I have two children aged 17 and 24 so in my head I wanted to gift them this land and I thought they might want to develop it in the future. I don't feel up to in barking on it myself. My mother always said to me don't sell the land, one day it will become extremely valuable as a developer will want to by all these plots together and the price will shoot up but I don't actually know if this is true anymore.

The house is basically one of 4 identical houses all with large gardens that run from one road, the length of the garden to the next road, the length of the block if you see what I mean. Two of these houses have done exactly that sold half of their garden and planning permission has been granted. Two town houses are being currently built on these plots so the development potential is very strong.

My Dh is pressurising me to sell. He says once the town house next door has been built it will be more difficult to obtain planning permission because of light etc.

So in a way it makes sense to sell. Also I hate the thought of a mortgage. I have always been mortgage free so the thought of a mortgage makes me feel uncomfortable. I always thought one should never turn unsecured debt into secured debt. However I don't on the other hand want to sell off something cheaply and regret it later. Also if I do get a mortgage I wouldn't be able to sell the land at a later date. Is that correct?

Yes I should look at my spending. However I has only recently become owner of the property. The debt has been slowly built up over the last 14 years

Is there anywhere I could get professional advice on this?

Thanks