Selling up to pay off debts?

Leanne8t3

Person_one wrote: »

But...you'd be spending the equity you release and any other spare cash on your extension and renovating your repo property, you still wouldn't have the money for foreign holidays for years if you went ahead with your proposed solution.

We would be clearing the debts which is my priority, then putting a deposit on a habitable house which can be improved over time. We should have 20k left to do it up a bit or extend a small amount. So even if we used all our equity from the house sale, we'd still be 1100 better off each month from no debts to pay and a smaller mortgage. If we saved 500 of that each month for renovations, that still 600 a month better off each month that we can put towards saving for holidays or a better quality of life.

slowpoke_rodriguez

Gigervamp wrote: »

I'd also want to pay that friend back asap. 20 grand is a lot of money to borrow off a friend, no matter how wealthy they are.

+1
and you're paying more than 6% interest on it.
Do the mortgage co know about this loan? I doubt they'd be too happy.

I'm with the sell up and move somewhere smaller view. Watch oiut for early settlement fees though.
As said above, check out the Debt Free forum. They're a friendly bunch and will help you with your options.

Good luck! I've been in a similar situation myself and it can seem very lonely.

borkid

Carer wrote: »

I have the opposite opinion to most on here. I don't really understand the need for everyone to have their own bedroom.
I, and many other families I knew, grew up in a 3 bed house with more than 4 people living in it. In my case we had 5 children in 2 bedrooms. It didn't do us any harm, in fact I think it made us closer as siblings as we had a lot of fun when the lights were out It also taught us to share and to be respectful of each other's space and possessions.

I think quality of family life is so much more important that a bit of extra space and so if you can bring down your outgoings to have a better life then I'd suggest you do it. Your children don't "need" a bedroom each, but they do need family time and a fun childhood.

In your position I'd sell up and buy a cheaper house, forget the extension and just put a conservatory on the back and maybe a chalet in the garden for the kids to have some space. They don't really need bedroom space, just living space.

Not always. I grew up in 3 bed house with 4 siblings. Hated it, no privacy at all, noise and my things being borrowed without asking. I now have no contact with my siblings, been that way for nearly 40 years. Whether it will work depends on the characters of the individuals. Just because they are family don't assume they will get on well.

Person_one

Leanne8t3 wrote: »

We would be clearing the debts which is my priority, then putting a deposit on a habitable house which can be improved over time. We should have 20k left to do it up a bit or extend a small amount. So even if we used all our equity from the house sale, we'd still be 1100 better off each month from no debts to pay and a smaller mortgage. If we saved 500 of that each month for renovations, that still 600 a month better off each month that we can put towards saving for holidays or a better quality of life.

I think this is really really optimistic and doesn't allow for much slack or contingency at all.

That 20K to do up your repo house was 25K on page 1 so already it seems like this isn't being very thoroughly thought through.

Let's say your house sells for 275K (because if an estate agent wants to put it up at 185K you have to plan for selling at a bit less.

After you pay off your current mortgage and debts:

- 180K mortgage
- 20K to friend
- 22K to credit cards
- 12K to car loan

That leaves you with £41,000 left from the sale of your house.

Now take off 5K for fees and costs associated with selling, you're down to 36K

A 10% deposit on a 130K repo house is 13K, leaving you with 23K.
Lets say you want to be sensible and keep 3K in the bank in case of boiler/roof failure or some other emergency. So there's your 20K 'equity' for you to spend.

That 20K will be used up faster than you can blink on a renovation project or an extension. You might find yourself borrowing just to be able to get the house to a reasonably finished and liveable state.

You could buy a 150K house that doesn't need any work, and then you'd be debt free and have some disposable income each month. Then though, you have to make the decision of whether you want to save up for that extension (which will need a lot more than the 18,000 you'd have by saving £500p/m for 3 years) or if you want to spend on enjoying life and foreign holidays and run the risk that life with 4 teenage girls or young adult women in a 3 bedroom house won't become a bit of a nightmare!

I don't envy your situation, you've got some difficult decisions to make, but if I were you, in the exact position you're in now, I'd be looking at ways to pay down my debts without having to move.

(Don't forget that your plans depend massively on getting somebody to lend to you for a new 90% mortgage at a reasonable rate. Even if your current one is technically 'portable' its not a given as they'll still do affordability and credit checks, and your current level of debt and consolidation plans might not help with that.)

Red_Spider

Person_one wrote: »

I think this is really really optimistic and doesn't allow for much slack or contingency at all.

That 20K to do up your repo house was 25K on page 1 so already it seems like this isn't being very thoroughly thought through.

Let's say your house sells for 275K (because if an estate agent wants to put it up at 185K you have to plan for selling at a bit less.

After you pay off your current mortgage and debts:

- 180K mortgage
- 20K to friend
- 22K to credit cards
- 12K to car loan

That leaves you with £41,000 left from the sale of your house.

Now take off 5K for fees and costs associated with selling, you're down to 36K

A 10% deposit on a 130K repo house is 13K, leaving you with 23K.
Lets say you want to be sensible and keep 3K in the bank in case of boiler/roof failure or some other emergency. So there's your 20K 'equity' for you to spend.

That 20K will be used up faster than you can blink on a renovation project or an extension. You might find yourself borrowing just to be able to get the house to a reasonably finished and liveable state.

You could buy a 150K house that doesn't need any work, and then you'd be debt free and have some disposable income each month. Then though, you have to make the decision of whether you want to save up for that extension (which will need a lot more than the 18,000 you'd have by saving £500p/m for 3 years) or if you want to spend on enjoying life and foreign holidays and run the risk that life with 4 teenage girls or young adult women in a 3 bedroom house won't become a bit of a nightmare!

I don't envy your situation, you've got some difficult decisions to make, but if I were you, in the exact position you're in now, I'd be looking at ways to pay down my debts without having to move.

(Don't forget that your plans depend massively on getting somebody to lend to you for a new 90% mortgage at a reasonable rate. Even if your current one is technically 'portable' its not a given as they'll still do affordability and credit checks, and your current level of debt and consolidation plans might not help with that.)

No, they would still have the mortgage debt.

Agree with the rest though - I was being overly generous with the £70k asset balance probably.
But you wouldn't know for certain until the house sold.

pimento

Leanne8t3 wrote: »

... We borrowed 20k from a very wealthy friend and pay him £100 a month to cover any interest he would have got and will eventually have to pay back 20k...

That sounds like a lot for just interest.

Red_Spider

Leanne8t3 wrote: »

I want to pay off all debts.

Good idea. Find the cheapest house you can buy to live in.

Leanne8t3

pimento wrote: »

That sounds like a lot for just interest.

It is a lot but it was the only way we could buy

Leanne8t3

Thank you everyone for replying.
I understand that we haven't been good at managing money and we need to address that. Having just consolidated everything and lowered the mortgage rates and utilities we'll be saving £500 a month so that means we no longer will need to use the credit card. 10k of our 22k debts were for the garage to bedroom conversion too so it's not all just overspend.
We can get by at the moment, we're not about to fall into arrears anywhere.
Maybe I've been getting carried away watching homes under the hammer??! Lol
I'll write down all the scenarios and get a couple more valuations

Leanne8t3

borkid wrote: »

Not always. I grew up in 3 bed house with 4 siblings. Hated it, no privacy at all, noise and my things being borrowed without asking. I now have no contact with my siblings, been that way for nearly 40 years. Whether it will work depends on the characters of the individuals. Just because they are family don't assume they will get on well.

Luckily ours get on well and half the time they all sleep in 1 room or 2 and 2. I imagine it will change as they get older though :rotfl: