Selling house to clear debt?

jellybean87_2

Hi,
We are approx 30k in debt and have around 28k equity in our house.

I am thinking about selling our house to clear most of it and going into a rented house. We have 2 young children so at the moment I can't increase my hours at work as we still couldn't afford childcare.
We are both in late 20's so would hopefully be able to buy again in the future.

I don't know if it's a good idea coming off the property ladder I've been a homeowner since I was 18 so I'm a bit clueless when it comes to renting!
Thanks for any advice.

ETa: our mortgage is currently 4.7% we can't get a remortgage. If the rates increase we're going to struggle to pay it.

HappyMJ

Personally I wouldn't sell if it can possibly be avoided.

Most rents are much more than what you would be paying in interest on a mortgage. If you have a capital and interest repayment mortgage you can usually reduce it to interest only for a short period of time but in any case the capital component of your monthly payment is going towards an asset.

How much interest are you paying each month and how much is rent in your local area for the property you require?

DandelionPatrol

As Happy says, selling a house with equity in it is not a step to be taken lightly, particularly if there is not equity to buy a cheaper place.

As ever, individual circumstances dictate how it is best to play your hand. There are no one size fits all answers. So I suggest you fill out a Statement of Affairs [someone will post a link hopefully] and give your best shot at listing the debts and the APRs

bexster1975

Hello

http://www.stoozing.com/calculator/soa.php

SOA calculator.

As others say, selling up is likely to be a last resort. Post a SOA here and loads of people will offer advice

Good luck

Bexster

sourcrates

Jellybean,

This is not a decision to be taken lightly, there are other ways of tackling your debt problem.
As others have said, renting can be a nightmare, depending where you live, rents can be higher than a mortgage would be.


If you can do an SOA, as advised above, it will then be possible to get a clear picture of what you have to work with.


At 30k, your looking at maybe a debt management plan, or possible IVA, but we need to see who you owe money to, how old the accounts are, etc etc, than we can advise better.

LittleDutchgirl

Hi Jellybean
I'd like to echo the remarks the other posters have made about not selling the house if you can avoid it and posting an SOA so people on here can help you out. Another point that I think is important is to try and work out why you are in debt. If it is generally overspending then you could sell the house, pay off your debts and in a couple of years end up in the same pickle. It does take time to learn new habits and really get budgeting but it is really worth it.
The good news is that this is a really great site with some lovely people who offer solid advice (and a shoulder to cry on if you need it)
Good luck
LDg

pathtofreedom

Have you factored in the selling costs as well as moving and renting costs? If you get on a renting ladder you would need a bigger emergency fund I'd think to cover having to move more often for deposits / moving costs / month in advance etc.

What is the area like you live in? Would you be able to afford to rent there or have to move somewhere else? What are the schools like where you're thinking of moving too?

I don't have kids but if it was me I wouldn't move to rent, just with the uncertainty of it, and the risk of having to move in term time or having kids changing schools a lot.

Have you looked at some of the other boards? There are real jobs where you can work from home, which might help bump up your income and fit around the kids.

StirlingDave

I'd look at this in two ways.

£30k of debt is likely to be around £600pm minimum payments. If you could move to somewhere paying the rent you are paying in mortgage that's the potential to save £600pm, or £7k per year. In four years time you could have the same money as you have in equity and, if the kids are in school and no new arrivals, a good position for buying your next home. So in four years you'll be in the position you are now (but weaker than in four years if you'd have slightly more equity), and in five years you will be better off. So if you don't plan on buying your next home for five years, you can rent someone of the same quality for the same price and you want to reduce stress/worries, it's a good idea.

Alternatively, renting can be more expensive than mortgages, so check out whether you would be eating into the money you're saving by being debt-free. Similarly, renting can produce it's own stresses - you have less control of when things go wrong (good from the position of not having to pay, but bad from the position of having no influence over repairs) and may well end up with uncertainty of whether the landlord wants to sell the property and force you to move. Another factor is that if house prices go down you'll have done well (who could have had the debt and no equity), but if they go up you could find you've done badly (that equity could easily become £60k without you doing anything).

So I would sit down and think about what you want over the next five years. How much is the stress of throwing money away in debt repayments affecting you? Do you mind throwing away the equity you've built up to repay debt or would that haunt you as a waste of it? Do you mind paying off someone else's mortgage whilst you slowly build up your equity? Is it important that you can do repairs/improvements to property? These aren't financial questions, but will help you understand what's best for you.