Sell house to pay debt advice

Paulapips

Hi everyone, sorry if this is posted in the wrong place, new to starting threads,
Anyways we are £65,000 in debt, £22,000 is two loans and the rest on a lot of credit cards, we make all minimum monthly repayments however it's gotten to the point of having no money spare a month, gong into overdraft, and using credit cards to buy food shopping. We earn between us about £3,000 a month, £513 on mortgage (interest only) and the rest goes on bills and debt, min payments are about £1,400 a month and it's killing us,
We have about £75,000 equity on our house and have tried remortgaging or getting a secured loan using a broker, however the affordability is awful and everyone has said no. Now my question is should we sell our home to completely pay off our debts? But won't have enough to buy so would have to rent, but will free up so much monthly income we would be in a position to actually save?
We would be selling anyways in about four years even if we didn't have debt to move south, once our son has done his GCSEs,
We would of course close down all credit cards once paid, I'm not stupid enough to ever get in this situation again, I really don't want to go down the Iva route, as it stands we haven't missed any payments and don't want 6years of bad credit, we are both nearly 50 so should've known better but hindsight is a wonderful thing.
Would you sell to pay off such a huge debt?

National_Debtline

Hi Paulapips,


If you are asking whether or not you must sell your house to deal with the debts, then the answer is no. There are debt options available (other than an IVA) that would allow you to pay what you can afford to the debts, and keep your home. However, the compromise of this would be that it would cause damage to your credit file and because you are breaking the contract there is a risk of enforcement action.


If you are looking to clear the debts, without any damage to your credit file, then your choices are to continue paying them monthly and overpay where you can to drive down the balance; or, as you have identified, downgrade your assets to free up the money to clear them. This really boils down to a quality of life. If you would prefer to no longer have this 'financial pressure' and clear them in the quickest way possible, selling the house is the solution. But you need to bear in mind the long term implications of renting.


However, if you can budget to the point that means you no longer use your overdraft or cards within the month, then this may not be necessary and you could look at various ways to boost your income and overpay the debts. Perhaps you could post a SOA to help other posters guide you further. Good luck,


Laura
@natdebtline

enjoyyourshoes

Before you get to 'how to pay off debts' its worth considering:-

How did we get into such debt

Work out exactly what the problems are (overspending, not planning for reasonably expected bills etc)

Both of you sit down and agree life priorities and put these into financial terms.

Agree how to manage money and then how to pay off the debts (it must be a combination of factors, planning, stopping spending, rationalising bills and getting best deals, saving for things instead of merely purchasing them straight away etc)

Then consider the option to sell and repay if that is the only remaining option you have.

thriftylass

I agree with above posters, don't rush to sell you house especially if the actual issue isn't resolved yet. You say you don't want to be in this situation again but how long since the unreasonable spending stopped? Has it stopped?

Also you say you have about 3000 income, 514 mortgage and 1400 min payments. Were do the other 1100 go? Maybe best also do an SOA and see if folks here have any suggestions to cut down and save your home. Look around the fora for motivation, it can be done.

All the best

sourcrates

Just from the most basic figures you have provided, if you were to go on a debt management plan, and get all interest and additional charges stopped, you could clear this debt at £1000 per month, saving you £400 a month, in a little over 6 years.

Its possible additional savings could be made from budgeting correctly as well.

Yes it may affect your credit file in a negative way, but common sense would dictate not to get reliant on credit ever again anyway, so this should be the least of your worries, on the plus side, this way you can still keep your most precious asset, your house.

Windofchange

sourcrates wrote: »

... on the plus side, this way you can still keep your most precious asset, your house.

Until the end of the interest only mortgage term when the bank says we'll have our money back now please, and the OP ends up selling anyway because I am assuming there is no plan in place to pay back the capital?

sourcrates

Windofchange wrote: »

Until the end of the interest only mortgage term when the bank says we'll have our money back now please, and the OP ends up selling anyway because I am assuming there is no plan in place to pay back the capital?

But with 75% equity, they should at least keep something.

Paulapips

Hey everyone thanks for your replies, I've done an soa but can't seem to copy it on my iPad, tomorrow I'll dig out my ancient laptop and try on there and will post as soon as I'm able.
We got into this many ways, I was a housewife for a decade, although now I work part time I relied on my husbands wage for ten years, firstly I'm a spendaholic, secondly my husbands job changed three years ago and was a huge pay decrease however I still spent like we had it, without thinking about my consequences, thirdly I would put so much "little things" on the card, £10 here £20 there and I've spent £200 in a couple of days.
I know how we've got into it, I say we but it's purely me and luckily I've a husband who doesn't blame me for that, he's says he will just carry on doing overtime, bless him he's my rock.
Plus we had a small loan for a small car, then we had to add another £5,000 for a new boiler, then another loan to try and consolidate credit cards.
It just sort of happened. I wasn't until November I really sat down to see how much I owed and it was twenty thousand more than I thought It was! I was so shocked. And was a huge wake up call to me, the only spending I've done since then has been food shopping, cut up all but one credit card.
I owe it, I will pay it, I just wished I hadn't gotten in this deep. I just didn't notice, I suffer with depression and have anxiety attacks often, I truly believe in my mind it makes me feel better when I treat myself or my family, my eyes are opening more everyday, this is not a quick and easy thing to retrain your brain to say no,
Also just to add, every month we go about £1,100 into overdraft, this month we got into overdraft by the 7th! We both get paid at the end of the month, this month has been the worse by far.

EDIT added below the expenses form thingy, hope I've done it right,


Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 400
Partners monthly income after tax....... 2600
Benefits................................ 80
Other income............................ 0
Total monthly income.................... 3080

Monthly Expense Details
Mortgage................................ 538
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 146
Electricity............................. 43
Gas..................................... 43
Oil..................................... 0
Water rates............................. 52
Telephone (land line)................... 57-this is internet and landline
Mobile phone............................ 98- for three phones contract ends in June then it can come right down.
TV Licence.............................. 13
Satellite/Cable TV...................... 0
Internet Services....................... 55 (I've doubled up and just noticed )
Groceries etc. ......................... 200 (sometimes 160 depends if we need extra things like cleaning stuff or meat)
Clothing................................ 50 (again not every month but my son won't stop growing and is already in adult sizes for years now)
Petrol/diesel........................... 40
Road tax................................ 12
Car Insurance........................... 34
Car maintenance (including MOT)......... 20
Car parking............................. Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 12
Buildings insurance..................... 43
Contents insurance...................... 0
Life assurance ......................... 98 (always had this since buying the house)
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 15
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1609


Assets
Cash.................................... 0
House value (Gross)..................... 75000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 76000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 159999...(538)......4.9
Total secured & HP debts...... 159999....-.........-

Unsecured Debts[/
Description....................Debt......Monthly...APR
Barclaycard....................17500.....420.......0
Tesco credit card..............7585......180.......0
House of Fraser credi..........650.......40........0
Sainsbury's loan ..............10000.....167.......0
Barclayloan ...................13000.....214.......0
Nuba mbna......................5900......80........0
Halifax credit card............4400......80........0
Virgin credit card.............3650......120.......0
American express...............2400......60........0
Mbna credit card...............1500......80........0
Total unsecured debts..........66585.....1441......-


Monthly Budget Summary
Total monthly income.................... 3,080
Expenses (including HP & secured debts). 1,609
Available for debt repayments........... 1,471
Monthly UNsecured debt repayments....... 1,441
Amount left after debt repayments....... 30

Personal Balance Sheet Summary
Total assets (things you own)........... 76,000
Total HP & Secured debt................. -159,999
Total Unsecured debt.................... -66,585
Net Assets.............................. -150,584

Windofchange

sourcrates wrote: »

But with 75% equity, they should at least keep something.

They haven't got 75% equity. They have 75k of equity as I read it. Looking at the SOA above, it would appear there is a 160k mortgage on the property, so it would suggest the house is now worth £235k?

If I were in the OP's shoes, I would sell up, take the equity out (if it is 75k), and pay my debts off. They don't actually 'own' the home, they are renting it from the bank. At some point in the future, they will need to sell it anyway because unless there is a big inheritance or something coming, there is no way they can pay back the capital. The question really then comes down to do you think the value of the property will significantly increase in the coming years, and if so, is it worth loosing half your monthly income to debt repayments for those years in order to cash it in as it were?

barbarawright

Is this an accurate SOA. You really spend £50 a month on clothing but nothing at all on entertainment?

Paulapips

barbarawright wrote: »

Is this an accurate SOA. You really spend £50 a month on clothing but nothing at all on entertainment?

Entertainment like what? We literally never go out for meals or cinema, we recently cancelled sky, when I was I'm my spending hay day I brought a lot of dvds, most of those are sold now but we still have a few we watch now and again, my son plays his tablet thingy, we are all too busy to do anything now anyways with all the overtime we both are doing.
I don't always spend that much sometimes I spend nothing, depends on what we need month to month, my son is 13 and six foot tall already and a size ten shoe, he literally outgrows trousers at an alarming rate! Then there's school clothing and sports wear etc, I try not to spend and can get some clothing in charity shops, but I get a generous discount where I work so can get school trousers there, then there's my husbands clothes, and mine but I rarely buy for us, just trying to be honest.