Sell up and rent?

FrauNaish

I'm in a bit of a pickle in trying to make a decision.

Husband & I have an interest only NRAM mortgage with a secured loan attached to it. In itself, the payments are manageable. We are past our initial 5 yr contract and now on NRAM's base rate of 4.95%.
We have, however, a large credit card debt between us. Home improvements, a failed business and spending beyond our means, we only have ourselves to blame...
At this point in time, I struggle a lot with keeping my head above water. We pay our bills every month, just. It's getting tight and so much of my earnings are going on paying off debts. I have a debt plan set up on the old MS Money program, so really trying hard to stick to it. Trouble is, it's just so hard because I can't afford to pay much over the minimum, my credit rating used to be excellent, last time I checked it was poor!

We recently had our house valued and after paying solicitors/agents we are looking at possibly fetching a 10k-12K profit. We are in a good area with an excellent Ofsted school down the road and houses are selling really fast here at the moment.
As you can imagine, we are extremely tempted to sell the house and simply rent. Husband is self-employed but only just over one year and with our debts, I just can't see us re mortgaging easily. Plus we could really do with that profit to make a big dent into our debts and finally get on top of them.
But is this the wrong path? Personally, I come from Germany, where owning your own house isn't such a major thing and renting is perfectly fine. But OH is a Brit and is really worried about coming off the "ladder". What's your opinion? Thanks so much!

cfcboy

Do it, ive done the exact same thing and would never go back

Had a lot of historical debts that got cleared. Once i had them all paid off i had no money worries, a good credit rating and some piece of mind at last.

Give yourself 12 months of no stress (sounds like you had a fair bit in the last couple of years ) and then look at the situation after that. Its the best thing i ever did and will never look back. Ive some of the money i was using on debts for savings and my housing deposit is graudually becoming somehwere where i want it to.

Your health should come first, sometimes you got to go with your heart rather than your head

Getitng back on the housing market should be fine once your outgoings are good, decent time of clearing up credit report etc. My FA said it will be no problem as ive had history of paying mortgage etc, not as if first time buyer either. Good luck

Tixy

I would definitely look in to the possibility of renting, especially if your mortgage is interest only and you cannot afford to switch to a repayment mortgage.

How much would renting somewhere suitable cost compared to your mortgage?
Will the equity from the house be enough to pay off all your unsecured debts? If not how much would you be left with and how much would your minimum monthly payments reduce by or how long would it then take you to pay off the remainder and get debt free?

A downside to renting in the UK compared to a lot of europe (not sure about Germany) is that relatively short term tenancy agreements are the norm here.
So it is possible you could find yourself having to move relatively frequently.

I guess the other things to consider are whether you would hope to buy again in the future and if so how likely is that to be possible given your situation/income/ages etc. And if you don't end up buying then what impact will that have on you in retirement in terms of affording rent etc.

natlie

Hi
I have done it and I recommend doing it too, I am in the process of selling the house although we moved into rented accommodation over a year ago we had tenants in the house but are selling now.


I have around £13k of debt our house has £54k profit in it clearing the debt will leae us with £40k in the bank and nearly £1k saving per month in debt costs/mortgage etc its a no-brainer really just wish I had done it sooner.


I think it gives you more flexibility as to where you can live and work and we have a much larger house, which, we could never afford to buy.


Go for it!
Nat

FrauNaish

Thanks! :j

Tixy, thanks for the tips for going into it with open eyes. The profit would not pay our debts off but it would half our monthly debt bill. It would mean that I can make considerably larger payments towards the debts that will be left and finally get out of debt completely.

I looked into changing to a repayment mortgage with NRAM which is apparently possible but we could not afford this, not with our unsecured debts. without them, no problem...

dominoman

4.99% seems high. First thing is to see if you can remortgage at a lower rate. If you have excess equity in the house you should be able to remortgage with another lender and pay off the debts in one go.

PasturesNew

I'd be tempted to say that you're not about to be bankrupt, so maybe a fresh look at some costs/options might see a clearer route.

You're past the hard bit and you've made it your home. Fire up Rightmove and check how much rent would be - I think you'll be staggered. When renting there are lots of fees the cheeky agents dream up too.

Alternatives might be to try for a 2nd part-time job just for 9-12 months to break the back of the debt .... and over-analyse all your outgoings to see what can be dropped/cut back on.

Looking in the short-term, it's worth it just for the peace of mind, but looking at the 3-5 year term it might not look so rosy and you only get one chance to get this choice right.

FrauNaish

Hi Pasturesnew, thanks for this.

We have been looking at the rental prices and yes, they are more than we pay on our mortgage but only by £100/month at most. Bearing in mind that we are not on a repayment mortgage...

A 2nd job is out of the question, OH already works all the hours under the sun doing extra freelance etc. I work from home around looking after a toddler to save on childcare. I'm very lucky that my work let me do this.

I'm very good with getting us the best deals on our energy bills etc. The only luxury we have is a Sky subscription but even cancelling that would be a drop in the ocean.

Can't think of anything else that we could do.