Selling my house to clear debt

Saints81

Thinking of selling my house to clear debt.
Currently my mortgage is £86000
Unsecured debt 8 in total is £14000
House needs updating with new kitchen + bathroom + boiler+ rear garden + driveway+ decorated throughout.
Have poor credit score so can not get remortgage to clear debt and do the work needed.
The plan is to sell for about £215000
Clear debt of £100000
Selling fees of about £10000
Put by £17000 for 1yr rent
Banking £88000 for a deposit on new house if I find one I like with in the year.

The reason for the debt and poor credit score was due to being self-employed and not earning enough to live on.
Now I am employed with a good wage and regular overtime. But because I can not put debt all in one place to make lower monthly payments it is taking for ever to clear my debt.

Would this be a good idea or bad?

middleclassbutpoor

Lots of variables to consider.

Current mortgage is 86k and £14k debt (£100k) in total. You are paying £10k fees and £17k in rent to do this. Thats a massive cost in your plan when I guess your mortgage payment will be a fraction of this cost.

What happens after a year in rent? Can you afford 17k a year? If so, your debts must be astronomical to feel that what your paying now is worth this.

Consolidation is never really an answer but the reason given for the debt would indicate that its not an issue which should happen now so I think given your original plan, I would probably say this route was more preferable over selling and really focus on paying off the debt quickly through overpayment.

Best bet would be to post a full SOA so others can understand your position better because there may be other options which could be offered.

EssexHebridean

Generally speaking, turning unsecured debt to secured in any way is considered to be a bad thing - and this is in effect what you would be doing.

For a first port of call I agree with MCBP above - fill in your SOA (Statement of Affairs) - you'll find the link in the "sticky" post at the top of the board here. Fill it in as accurately as possible - it needs to reflect what your situation is now, not what you *think* you should be doing. If you then post it in here we can take a look and see if there is anywhere that savings can be made that you might have missed, or ways of approaching things differently.

In direct proportion to your assets, your debt is remarkably low, so let's see if we can find a way forwards for you that doesn't involve you losing the home you've worked so hard for shall we!

dionysia

You can have unsecured debt *and* a decent credit file as long as you're servicing the debt properly and comfortably covering your costs every month. With over a hundred grand equity you should be able to remortgage. How long have you been employed? Can you currently afford the minimums on your debt (and maybe a bit extra)? If so, consider giving it 6 months - 1 year and see what you can get to remortgage then.

otoh with so much to do you sound like perhaps you're feeling ready to move. Is £215k as a fixer-upper definitely realistic? There's always a risk to getting off the property ladder.

EssexHebridean

Treat clearing debt and remortgaging as two separate entities otherwise you're right back there with turning unsecured debt into secured...

January2015

Saints81 wrote: »

Unsecured debt 8 in total is £14000

I know that £14k feels massive to you, but it is possibly not an insurmountable figure to tackle. Do an SOA for others to advise you.

Saints81 wrote: »

House needs updating with new kitchen + bathroom + boiler+ rear garden + driveway+ decorated throughout.

Be honest with yourself - how many of these are needs and how many are 'wants' ??

The only thing I can see on your list that could be a real need is the boiler. Boilers tend to be repairable for years and years (says the lady who just had to have a nine year old boiler replaced )

I'm on a DMP and own my home. I [STRIKE]need[/STRIKE] want a new kitchen and bathroom and boy does the house need decorating. I don't have a drive but wish I did Seriously though, take another look and be realistic about needs and wants. There are some fab ideas on the internet for smartening up old kitchens and bathrooms cheaply. Even buying second hand kitchens on eBay or similar is worth considering. Updating your house doesn't have to cost tens of thousands of pounds and doesn't have to be done 'now'. Regarding decorating other rooms (living room, bedrooms etc). - paint doesn't cost a lot and some areas have paint recycling centres where you can pick up paint really cheap (and even free in some cases). Keep an eye on freecycle/Facebook sale pages - we've put gorgeous laminate flooring down in our dining room and it cost me £25 from Facebook as someone locally had moved into their new home and didn't like what was already in the house and sold it to me - it looks fantastic and no-one would know (if I didn't keep telling everyone about my bargain) that is wasn't brand new :T

Saints81 wrote: »

Have poor credit score so can not get remortgage to clear debt and do the work needed.

Please don't consolidate unsecured debt into secured debt. I've done it twice - biggest mistakes I've ever made. I'm not the only one on this forum who will say the same thing. I am so glad I found a different option to tackle my debts. I am now on a DMP. I am not saying you need this route (or anything similar) but look carefully at your finances and your options. You may have to cut back on somethings but consolidating is very rarely a good idea.

Your credit score may well improve if you sell up/clear existing debts but your credit history record goes back over 6+ years so it will still reflect some poor history and this is likely to continue to be reflected in your credit score for some time. You may not get a good mortgage deal in a year or so's time.


Personally, I wouldn't sell my home to clear my debts. I could and I would easily have enough to clear the debts and either rent locally, or (more drastically) move out of the area I live in and buy something smaller. It's hard enough to get on the housing ladder with good credit these days and whilst house prices can go down as well as up, housing prices seem to continue increasing at the moment - jump off the ladder for a year and you may be shocked at the increase in prices.

sourcrates

With regard to the kitchen, B & Q do some really good, cheap kitchen cabinets, or online from a wholesaler for even less, kitchen appliances can be bought cheap online as well.

I did my kitchen for less than 1k, my bathroom for £600, my garden myself, with a bit of hard work, and completely redecorated from top to bottom for £100 worth of paint.

The boiler can be expensive, depends what fuel you use, if its an oil boiler, you only need change the burner, approx £250 online, Gas a bit more complex, as you need an engineer, but prices differ wildly, so shop around.