Selling up to pay off debts and start over

bmchutch1

My wife and I own a house. We are considering selling it to pay off all our remaining family owed debt and to rent and start all over again. We would be entirely debt-free.

This is a rather long winded story so please bear with me.

A few years ago we got into trouble financially and turned to a debt management plan. Which worked really well for us. The only real downside was we both have ruined credit ratings as a result. We have spent the last 6 months trying to remortgage but with no realistic takers. The only offers we have had are for huge interest rates for not enough money. Which would see us worse off than we are now. We could sell our house now and walk away with roughly £100k.

We have 3 kids but cannot afford to really do anything with them as our money is too tight. At the same time if we sell our house we have nothing to hand to our kids in later life. Just to say, we have learnt our lessons with debt and have changed, unbelievably so.

Your thoughts would be greatly appreciated.

newgirly

Hi, can you not stay with your current provider?

G_M

Presumably by 'remortgage' you mean either taking out a 2nd mortgage to pay off debts, or switching to a cheaper lender's product than you current one?

Without wishing to raise another issue, how is your credit history going to affect your ability rent?

Thrugelmir

Is it not worth remaining where you are. Working through the DMP. Providing your family with a secure stable home. Doesn't really matter if your credit rating is shot now. The damage is done. Learn from the experience. Live life without credit. While continuing to repay the mortgage of course.

bmchutch1

I forgot one major factor. 40% is owned by Catalyst Housing. So a second mortgage/loan isn’t allowed. The only way of remortgaging is by buying out that percentage of the property. Which isn’t sustainable financially.
We have finished the DMP.
We could stay with our current provider but we would be in the same dire situation.
You’re right about the credit history potentially being a problem as well.

getmore4less

What deal(rate amount term payment) is the current mortgage house value and rent on the shared bit?

without more details it is not really possible to suggest anything.

Might be one for the full debtfreewanabee analysis before doing something as drastic as selling.

http://forums.moneysavingexpert.com/forumdisplay.php?f=76

you say you finished your DMP last year so just the mortgage to deal with unless something else has happened.

With a full SOA analysis something will be possible , in most cases if other debts are clear and there is some equity moving to rented does not save much is anything.

Lioness_Twinkletoes

I completely agree that you should carefully examine all your options including staying put and continuing to pay the mortgage. Ask yourself honestly if this isn't a knee jerk reaction to completing the DMP. Also - you must have some disposable income now that the DMP is completed?

BUT, I am also of the view that if you would rather have some readies in the bank, to create warm memories with the children, then selling the house isn't the most ridiculous idea, especially as it is SO. I also don't hold with the crappy idea that you have to 'leave something for the children'. You really don't. Your job is to rear children that are smart and hardworking and capable of providing for themselves. Besides, you both might end up a care home and have to sell the house.

However, you do need to consider that private rental might be your lot for the rest of your lives. It's not the most secure way of providing a home. It's expensive and can be stressful - especially as you grow older. You might have to move more often than you'd like - and pay for the associated costs (deposit, referencing, credit check, removals etc, etc). Your credit rating might make private rental very difficult and you might only be offered low rate accomodation no one else wants.

You also state you'd be left with £100k. This is assuming you sell for the price you think you can get. Also, it really won't take long to burn through £100k - and then you'll have nothing.

Mutton_Geoff

I agree with others who say stay where you are. You are in a good position with security of tenure. If you sell your house, your £100k "windfall" isn't a prize to be spent, it's the sum total of your personal financial wealth. You probably won't be able to get back into the position you are now, so best to work with what you've got and build your future slowly.


Have you approached a mortgage broker for advice? They will have experience and access to deals not available directly.

bmchutch1 wrote: »

We have 3 kids but cannot afford to really do anything with them as our money is too tight

I've never understood this. I appreciate some money is required to bring up kids but we are saturated with advertising for things we must buy to make our lives whole. This simply isn't true.


My mum had 4 of us by the time she was 21. We had little or no money and my mum used to do a lot of dressmaking/repairs/curtain making etc to make money. But I don't remember being short of attention. We used to catch the bus to the beach whilst Dad was at work, we used to walk to the park to play.


Money is not required to do things with your kids, it's just the marketeers would like us to feel inadequate unless we're spending money with their businesses to make ourselves feel adequate.


Ignore them and look on these forums for 101 moneysaving ideas and things to do.


Good luck in your recovery and well done for getting this far.

bmchutch1

We have asked a broker, whose only solutions are to pay hugely inflated prices for a 2nd mortgage.
We aren’t looking to spoil our children. It’s not like we want to go to Disneyland, it would just be nice to able to go out for a cheap meal once in a blue moon.

mailmannz

I was in a similar situation to you bmchutch1.

We were up to our eye balls in personal debt with no way out as we were merely maintaining everything without really making any inroads in to our debt.

On top of that was a second charge (25% of the house value, which was the deposit to get us in to the house to start with) on our house that was due after 10 years (the 10th year would have been 2018). Combining our already high personal debt levels, ridiculously poor credit rating AND the second charge meant no lender would touch us with a barge pole. On top of that was the spike in interest on our second charge that we would have eventually been forced to sell to clear after a further 3 years anyway (part of the second charge agreement was an ability to extend the dead line a year for three years with x% added as interest).

In the end we sold our only asset, the house to clear all our debt and moved in to rental accommodation so that we could rebuild our credit scores (which we have been doing for the last 6 months).

I cannot tell you how relieved I was to lift that sinking feeling off our shoulders by getting rid of all our debt so that we now don't owe ANYONE money! It is an absolutely utterly amazing feeling!

Anyway since April this year we have been in rental accommodation doing everything possible to repair our credit ratings and build up our deposit!

For the first time in living memory I am now going through the month WITHOUT the need to use my credit cards to pay for anything! I can now actually pay for everything with cash!!!

And in the last 4 weeks we have begun the process of buying a new home for us! In fact we have just returned all the signed documentation to our solicitors and hope to exchange contracts in the coming weeks!

For us it was a chance for a reset to sort our lives out and put some serious plans in place for our retirement and the future of our kids.

The fact that you would have £100k left over once you have cleared your debt is a good thing and is a hell of a deposit to start with (unless you live in London, in which case you are !!!!!!ed ).

Dont look at this as the end of the road. This is far from that for you. Selling your current house isn't the end of the road but the beginning of a new journey for you and your family.

If you have any other questions feel free to PM me.

Regards

Mailman

mailmannz

bmchutch1,

I don't know how old you are. My wife and I are in our 40's and could only stretch the mortgage out over 23 years because of age limits from lenders. Even then it is our expectation we will pay the mortgage off well before we get near retirement age.

Remember, buying a house in your 40's is still a boss move! :T

Regards

Mailman