Do I sell my home to pay off some debt?

Spatton

Fight as hard as you can to keep your home, getting back on the property ladder later with a DMP (however old) will be all but impossible, especially with the recent tightening of consumer credit criteria. (I speak from close family, but not personal experience). I know this will sound harsh, but do you really need a £7000 car? Cheaper cars generally have lower insurance and running costs, be ruthless and honest about the difference between what you want and what you need. Work all the extra hours you can (at one point in my life I had 3 jobs, 1 x FTE and 2 x PTE), take in a lodger, freecycle if you need things, and cut back on any ready meals etc. Perhaps try and think about it as a money diet. The simple truth of losing weight is eating less and exercising more, and the simple truth of not earning enough to cover your outgoings is that you have to re-set your standards to match your income and there is absolutely no shame in that. I think some of the current debt problem can be laid at the door of advertising firms who trick us into believing that we "need" things when we don't. Perpetually treating debt with more debt in the form of loans isn't going to break the cycle of you wanting more than you can (at this moment) afford, because you haven't changed fundamental lifestyle habits. I know this is going to be hard whatever you decide to do, so the very best of luck!

JasoninScotland

Hi, my advice is to look at your DMP payments as the chances are the company who arranged the DMP are probably taking about half of your payments in fees. Check what your paying, and contact the creditors directly. Whatever your paying the creditors through the DMP could be a few pounds per month depending on how many debts you have. Look at it yourself. If you have 4 debts they'll receive a share of £40.00. Here is how to work out what is being paid.How much should I offer each? This is exactly how the DMP was calculated.
One way to work this out is to divide the money on a pro rata basis. So that, the larger the debt, the larger the monthly offer of repayment. This way is commonly used in debt advice and by courts. To work out pro rata offers, for each debt in turn:
Divide the amount owed on that debt by the total owed on all your non-priority debts.
Multiply the answer by the amount of money you have left each month for non-priority debts.
This gives you the monthly offer for that debt.
Example: Joe and Paula have £30 a month to pay the following debts:

Credit card £1,600
Bank loan £650
Phone £450
Total owed £2,700

Their offers for monthly payments are:

Credit card £1,600/£2,700 X £30 = £17.78 a month
Bank loan £650/£2,700 X £30 = £ 7.22 a month
Phone £450/£2,700 X £30 = £ 5.00 a month


Or contact your creditor and ask how much they receive every month. Infirm them you'll pay directly. This will save you up to £40.00 month. The DMP is a con. The citizens advice bureau or Stepchange will help you free of charge.
Please cancel the DMP.

JeremyCH

Ok, I've been in exactly this position in the past when I had a period of long-term employment and it wound up with both my wife & I having to go bankrupt. As it happens we were in negative equity so although the Official Receiver put a charge on the house we were able to buy them out for a nominal £1 after we were discharged so came out of it with our assest intact and debt free - very definately a court of last resort but it may be an option to consider but do take profesional advice as the strain and anguish of this process is huge.

Everything evryone else has asid is good advice - try to cut your costs but but not to the point where all you do is work, eat and sleep - try to leave a little bit of a leeway for the odd (say monthly) treat - a trip to the pub or a takeaway, it makes a huge differnece to your quality of life.

Look at your shopping - if ther's just the 2 of you where can you cut back - shopping in Lidl or Aldi can knocj pounds of the bill; 2 of you buying a £3 mael deal from the supermarket equals £30 a week, make your own - and it's probably healthier to. If you smoke switch to a cheaper brand or even rollups - geiving up would be ideal but if you're stressed out now then I wouldn't bother - agin been there and know what it is like. Get rid of Sky if you have it and go to freesat - £70 a month for the full package is a lot of money if things are tight.

Have you considered a change of job or even taking on a second, part time one?

Be very, very careful about selling - if the esate agent is quoting £154 that will probaly wind up as £140K so all your margain is gone and you would be worse off.

There are no easy answers but, as someone who has often struggled with lack of income, a seriously hard nosed look at where the money is going can often supply some surprising savings

I wish you all the best

Avon2001

If you can not sort out your debts then sooner or later you will be made bankrupt at which point you will almost certainly lose your house. Unlike a previous poster you do have equity in it and your creditors will want it. I strongly suggest that you do what other people have suggested and go through your finances in detail and realistically. In particular look at the DMP and see if it needs to be renegotiated. Realistically means that you have to have enough money to have a decent, basic standard of living. You can live off beans on toast for every meal for a couple of weeks at a time but not over the long term. You're also going to have to be clear about the fact that there is a strong likelihood of interest rate rises in the near future. If you determine that you have a realistic chance of paying of your debt then staying put is probably your best option. If, however, you are looking at bankruptcy then I'd suggest you sell first and get a place to rent as you will find this much easier before bankruptcy than after it. If you do go down this road, get proper advice before you pay back anything to anyone. If it looks like you have given preferential treatment to any one creditor (e.g. paying off the loan in your mum's name) then you could both get into trouble. This is a practical dilemma, not a moral one. It's about seeing how the sums stack up.

judy2206

Hi, i've read all the previous posts and no-one has mentioned that if your car is on finance, you cannot sell it until the car finance has been paid in full. Cars must be sold on as HPI or finance clear, as my daughter tried to sell her car previously and was refused because she still had finance. Hope this helps!

ska_lover

lauren101089 wrote: »

Hi, It's the first time I've created a thread so thanks for taking the time to read it :j
I'm in a dilemma.. Do I sell my house to pay off debt?

Myself and my partner both work full time but we're struggling to make ends meat, At the moment i've not got enough money to pay my bills for the month nor do we have any money for food/petrol etc.. its the same old every month.
we bought our house for £138,000 with £7000 deposit.
Todays valuation was £154,950
So I worked it out that IF we were to sell to pay off our mortgage would be £117,000, pay taylor wimpey back their £14,500 interest free loan, solicitors and estate agents fee's approx £3000.

That leaves us with about £20,000 equity, were already on a DMP and pay £80 a month but with the 20k I was thinking of leaving the DMP and instead paying off my car finance (approx £7000) and a loan in my mums name (£11,000) which would free up £445 extra a month which is the saving in monthly payments for paying off debt.

My plan would then be to rent, I currently pay a mortgage of £580 so if we rented for about £500 there's another £80 saving.

Has anyone done this...Any advice? Thanks in advance

MSE update, 15 July 2014: Thanks to lauren101089 for posting her dilemma - we've decided to include it in our weekly email. Please be kind when responding.

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Oh what an awful situation OP, I really feel for you

Are there any early termination charges on the car loan and the loan in mums name?

I would not sell my home if there was ANY other way. As people have said, you could EASILY end up paying the same in rent, as you do your mortgage - and you may never get back on the property ladder again

If I was in your situation, I would look to earn more if there was any way. I would look at things like the following :-

Apply for better paid jobs if possible

If a promotion not plausable, how can you utilise your current position to its maximum earning power, apply to go on nights?

Apply for jobs more locally to cut out the petrol money

Both get second jobs (not easy I know, but won't be forever) we did this for a long while whilst saving a deposit

Post incomings and outgoings on here so people can help cut costs where neccesary, get rid of mobile contracts, sky tv etc

Sell anything that is unneccesary and not nailed down

marich

I have huge sympathy for you . You have reached for something but the price is proving too much . You have foreseen a possible fork in the road because you feel yourselves in an unsustainable situation .

As others have said - before it gets too much for you look for advice from people who know the options and the details of those options. Citizens' Advice certainly know the ropes! Figure out your 'bail-out' strategy in advance - that would be your last resort but it helps to know in advance how to go through he process as gently as possible.

Then ask yourself where you are . A Taylor-Wimpey home that supposedly has equity (look at what they really are selling for), a car that is too expensive to keep buying but was probably overpriced , and all the other stuff . Ask yourself what it is all about !

You are working yourselves into a desperate life for the profit of people who have sold you an illusion and hold you indebted . Your 'dream' is only a reality if it can be realised - otherwise you are being deluded (by yourselves or others - it doesn't matter any more) .

You have to decide whether you can realise it and clear the mountain of debt or whether you are going to crash into it . So firstly find out how to land yourselves in the gentlest way , and then see how things are after you have made some sensible decisions as to how to renegotiate or minimise your outgoings (and also looked at acceptable ways of generating any more income).

As at present you see a lower-stress landing option and are tempted to take it . Others are telling you to hang on to the only thing you have going for you (the roof over your head) . It's not an easy place to be , but it has to be gone through with eyed wide open and with no more illusions .

h15t0r1an

I agree with everything everyone has said. I'd also go stronger. House prices go in cycles. They do go down. Sometimes there are even longer periods of them going down. I'd add to all the advice above that even if house prices do go down, even if you land in massive negative equity due to a market drop in house prices in the next few years, you are still better off staying in the house. Weather the storm. The cycles work so that there will be a time when the house value comes back again. If you can find a way to keep paying enough to stay in the house in the meantime you will be in a better position than almost every other choice you might make.

It could also be useful to think about how this mess arose. Did these multiple debts just arise through just your costs of living every month? Or, was there some event or some one-off thing that happened to you such as losing a previous job, illness, or something else that happened which meant you couldn't work for a while, or had a sudden large extra expense? If it was just day to day living then following the advice of other posters above is your only hope. If you were hit by a one-off event then please be aware tough events may happen to you several times as you go through your life. So please follow the advice of other posters anyway :-)

Good luck. The best thing you have done so far is come to this forum. Next thing follow the advice here. I'd suggest getting an appointment with the CAB as soon as you can as the next step.

gloriouslyhappy

You must feel like you're spiralling round in ever-smaller circles and getting nowhere, but take heart from the fact that you're already looking at your situation realistically and have the will to do something about it. That said, don't rush into selling your home, because as others have pointed out, renting can be an uncertain option and you might not achieve a good sales price for your house.
Do have another look at your spending, and see where you can cut back, there's always something. Mobile phone, broadband packages, travel costs - is it possible to trade in the expensive car for an old banger, or ditch the car completely and save all the petrol, insurance, MOT costs. If not, is it cheaper to take the bus than pay petrol, maybe get a SORN when the MOT is due?
Have you got things you can sell on ebay, Amazon, at car boots? Books, DVDs, bric-a-brac, clothing? Can you make things to sell - go brambling for free blackberries, wild apples and sloe plums and make jams & jellies, buy cheap tomatoes and make chutney, buy cheap bits from the Pound shops, divvy up and package in cellophane with a ribbon and sell as kids party bags at the car boot? Advertise your services at your newsagent or local supermarket for pet-sitting, dog-walking or parcel take-in for busy local people? The Christmas craft fairs start coming up soon, and people planning holidays will be thinking about their pets and house plants, so get an ad in soon.
Please don't rush into anything as when the house is gone, it will be difficult to buy another, and the rental sector is not especially secure for tenants, but please do get impartial free advice from organisations like the Citizens Advice Bureau.
Most of all, I suggest you take a deep breath and have a nice cup of tea, then take another look at your options.. wishing you all the best..

Fujiko

Two people working and you can't afford to eat or even put petrol in your very expensive car? If you can get into such a financial mess how do you think moving into rented accommodation will help? I feel you have a real problem with handling money. What is needed is a serious re-think of your life style, which seems to be funded on debt, and then carrying out many of the very sensible suggestions already made.

The only money we have ever borrowed was for a mortgage, paid off early. For everything else we paid cash - if you can't afford it go without until you can! Also although I worked for a few years we never counted my salary as income, but right from the start lived on just my husband's salary. Quite frankly, I have an absolute horror of being in debt and although I use two credit cards, one for house the other personal expenses, they are always paid off in full each month. A counsel of perfection? Perhaps, but in the end it leads to a much happier life.