Do I sell my home to pay off some debt?

kazt2006

Hi

I was seriously concerned when I read your post - not least for the amount of unsecured debt you have and that lenders have been irresponsible in allowing it to get so bad!

Along with others, I question why the car loan is not included within the DMP & why you were allowed to borrow more when clearly things were already unaffordable. Although, I think you had problems before this if you've taken a loan out in Mum's name (I assume with her permission!)! You talk about your mortgage - is the house in just your name? Is it you or your partner that is the risky person with the debts?

You mention that your house has a Wimpey interest free loan on it - I assume this is some sort of shared ownership deal? Might be interest free but are you making any repayments on it? I know when I first looked @ buying 6 years ago, it was cheaper to buy outright with a 95% mortgage than it was on shared ownership.

Given the hoops I am currently having to go through to move up the property ladder, I doubt remortgage is an option without perfect credit history even with the same lender.

You could explore selling your house, but I'd look for one of the independent agents or DIY the sale. You can also get fixed solicitors fees and negotiate here too - I did for being a previous customer! If you tell the agent you need a sale, they will get you one but it won't be the price you are expecting. Consider agents who don't already have similar properties and aren't selling these. You might also find that as a relatively new build (under 20 year old) that you'll struggle to sell as there is limited opportunity to add value for someone buying it and therefore you could be setting your expectations on selling price too high.

Get some independent debt advise to go through everything pronto before making any rash decisions!

Finally Good Luck!

cazpost

I would agree with many other posters, selling the house is a last resort. I have had a rough few years, where my income went from £30k to practically zero, due to illness. I have used most of my savings,sold my belongings , and scrimped and scraped to keep up with my mortgage payments and have now managed to return to part time work,which combined with benefits mean I have about £1200 a month . My mortgage payment is £600,and will no doubt go up soon. As you can imagine I struggle every month to meet all the bills,but I do it by not eating out,not buying frivolous 'stuff',using coupons,seeking bargains etc. There are lots of ways of going out and having fun that don't involve spening vast amounts of money! I could sell my house and rent privately,which would mean I would get about £50K in equity. However,in my area,which is 'desirable' a one bed flat is around £750pcm ! I would also lose the benefits that I am currently entitled to due to having money in the bank.
Think very carefully about your spending, renegotiate your debts,consider extending or renegotiating the mortgage,sell anything you don't need,including the car. Get extra work if you can,get your partner involved in solving this, it isn't just your problem,get proper help and advice (CAB or whoever) but most importantly,you need to seriously rethink your lifestyle and attitude to money.

jl_max_l41_p24

The answer is ... it all depends.

Personally I would try and hang on to the house as long as possible. Mainlybecause you have probably chosen that house and it meets many of the criteriayou think important such as location (near to schools - if you have children,shops, friends, family, etc, etc) , affordability (at least at the time itwas bought).

You look like you are considering a sale to capture the extra equity in yourexisting house as the price of it has gone up. However, when an estate agentsays it is worth a certain price he is telling you to put it on the market atthat price. Buyers will expect a discount (unless you are in London, if thepress is to be believed). Anything you have to knock off to realise a salewill eat into your £20,000. You could find the £20,000 is nearer £10,000 andthen you would not be able to pay off the things you mention. There are alsocosts to redeem a mortgage when it ends and the cost of moving itself if youhave furniture, white goods, etc.

There are other cost associated with renting. If you renew a contract everysix months I believe you have to pay a fee each time and you may well end uphaving to pay removal charges as well if you decide to move location again.

Using any money to pay off things is a once in a lifetime event. Once themoney is used up it has gone and you are in a worse position than before youstarted. I had a redundancy payment that got used up to pay a few things,then we thought we would have a holiday, then no work for six months and itdwindled away far quicker that we could imagine.

If you do end up taking this route be very careful how you allocate the£20,000.

If you change to a rented property based on the cheapest rental pricepossible you are most likely going to be be sorely disappointed. Thelocation, does it have parking for your car, the size of the place, etc aregoing to drive you mad if they are not as good as what you had already.

If you ever want a mortgage again, the new minimum deposit is 10%.For you current house valued at £158,000 that a huge £15,800. As house pricesgo higher you will most likely find you can never afford the house you oncehad.

Changing tack slightly, you mention the whole change to rented accommodationwould benefit you to the tune of £80 per month which is around £18.50 per week.To my mind it hardly seems worth the gamble.

If you sell the house you may find the agreements you have reached with anycreditors have to be re-negotiated as you will no longer be in as strongposition as you are now. Everyone is looking at the extra value in your homethinking that in the worst case, they will get some of that for themselves. Ifyou manage to take it for yourselves any existing agreements may end up beingmore demanding than they are now. If you owe a bank any money, when the £20,000or whatever gets transferred it may be swallowed up before you even see it. Sotake care and check any small print you have carefully.

Selling the car may be an option but depending what sort of finance youhave, you may find the car does not belong to you until the loan ends.Sometimes the penalty for early redemption is as much (or even more) than ifyou left the loan running. So explore every avenue with caution and get someadvice from a financial expert.

Hopefully there are some things that could be changed to get close to the£18 per week figure. Is there any chance you could get a cheaper landlineif you have one ? Can you lower mobile costs ? Can you reduce you gas /electric usage so that your direct debits or whatever, can be reduced ? A poundhere and a pound there will make a bigger difference than you perhaps imagine.

Do you have any hobbies that could be used to advantage. If you live wherethere are gardens, can you mow someone's lawn on a Saturday afternoon for £8 orwhatever. Beware of money making schemes - they tend to be money makingfor the people running them, not the people doing the work. Perhapsthere is something you do that others would be willing to pay for.

If like we used to, you sit at home all weekend thinking you can’t afford todo anything, find somewhere such as amuseum or park where it costs nothing to go and try a few things you didn’tthink you would like. Sometimes you find something that really cheers you upand you can find that things get a better perspective when you have had a fewhours of quality time together away from the everyday problems that can becomeoverbearing.

If you have any friends or family who are in a better off position, are theywilling to pay you even a small sum per week to do a few jobs (eg gardening,ironing, dog walking) ?

I hope you find something that will allow you to make your livesbetter without resorting to selling your home. You must have worked hard to getit in the first place. If it does come to selling, make sure you get the bestdeal possible that suits you and not anyone else. Go into any new venturefeeling you have chosen it and not thinking you have been forced into it. Goodluck.,

Marg

Lots of really useful wise advice - it's a few weeks since the original post - I'd love to know if she has read the answers & where she is up to with her dilemma?

desperate_times

Well currently in the process of selling our house to reset things financially and can't wait. Rental will be around the same level as mortgage payments but without the maintenance costs. We will have a 12 month contract with somebody who wants to rent out long-term so expect will be able to rent for longer. We will miss out on capital appreciation but that hasn't been huge in recent years anyway and could easily be small or negative in the next few. The biggest thing is having some financial leeway again and not constantly having to worry about paying every bill, not being able to have a holiday, etc. The stress of that is huge and I will be relieved for that to disappear. It will make a huge difference to emotional health and to family relationships and I am sure my income will improve as get back into a better place.

Talent

Do all you can to keep the mortgage going on the house. Don't borrow from any source. Sell what you don't need. Sell the car if it's possible and get a bike. Buy secondhand. Scrounge. Negotiate and re-negotiate....
We got through the 70's when interest rates went up to 16%.

tallgirld

I would start by selling the car and getting rid of any other unnecessary stuff. From SKY tv to Gym membership to BT voicemail (they charge for that!)

It would be a shame if you have to sell up because wherever you live it will cost you!

Good luck :-)

Ebenezer_Screwj

£500 rent is only £80 less than your mortgage, can you not save at least that amount from your monthly spending? My wife and I live extremely cheaply by only living on fresh home-cooked food for our evening meal and making home made soup and sandwiches for lunches. Do you use the budget supermarkets? Are you in the habit od eating out? Do you really need to run a car? Do you review your utility bills and insurances? With two incomes coming in you are certainly spending more than you should on something.

nicky376

I've had a quick look through the posts and have not yet seen an answer similar to what I've done when my mortgage became too high...

Your home is not just an investment for now, but for the future too. If you sell up and start renting, you will be stuck paying out a big lump sum on living costs into your retirement. Whereas if you can manage to pay off your mortgage with time, you'll then have an amazing asset financially when your only getting minimal money in possibly from a pension.

So instead of selling up to raise more money, have you considered renting out your home? You could then rent out somewhere slightly cheaper, meaning you spend less on living costs each month. The rent you receive for your property should equal, or even surpass, your mortgage (remember to factor in estate agent costs and tax). It has the advantage. This way you might even make money on your property. Then when you feel like you have dealt with your debt, your home could be there waitin for you to move back into and you would never have missed a mortgage payment.

matthewinuk

shireknight wrote: »

I would fight tooth and nail to keep your house, a house isn't just a house it's also an investment as your opening post already shows "we bought our house for £138,000 with £7000 deposit.Todays valuation was £154,950"

If you turn to renting you may be paying a little less each month but you're also throwing away probably one of the largest investment opportunities of your life, I would struggle now and reap the rewards in the future, if it comes to the crunch then re-mortgage in order to get hold of the equity but don't sell :-)

With respect to the above comments, your house is not an investment unless it puts money in your pocket. Currently you claim to be paying out over £500pcm to sustain the house. If the house is taking money out of your pocket it's a liability. The only person your house is an investment for is the bank, who pocket more than £500 of your money every month. Some may cry "but the bank fronted the money to buy the house!". Erm... yes, but technically, they created that money out of thin air by extending bank credit.

All that aside, currently you DO need more income and less outgoings. As mentioned by others, re-mortgaging the house would allow you to realise some of the capital gains the house has accrued to either pay off debt (freeing more of your monthly income) or to pay monthly debt repayments.

Another suggestion - get a lodger if feasible.

Another - I don't know if any are available in your area? There are companies that will buy-to-let your house back to you I believe. Plenty of options.