Should we sell our flat to become debt free?

Smiley80

Hi all.
Situation....we have MTG of 145k and flat valued at 240k. We have been here 14 yrs and paying just interest only. We have 2 rapidly growing boys and space is very limited. It is quickly becoming unbearable and really getting us down.
We'd love to move to a 3 bed semi but it is impossible in the area we live in. Our salaries just aren't high enough to stretch.
Our second and more critical issue is the 70k of debt we have managed to rack up since having our kids. Spread across 4 loans and 5 cr3sit cards. We are forking out 1750 a month to meet min repayments.
So.
Do we sell our flat? Use the equity to pay everything off and then find a 3 bed semi to rent?
We would be looking at a 1750plus MTG 350 =2100 a month currently down to 1200-1300 a month ren't payments.
Financially it makes sense. But I would live to hear from any one else who has been in our position. Or opinions on coming off of the property ladder to renting.
We would hope to one day get back on it. But for now we have this or an IVA as options.....
Advice please! And be nice!

Money_maker

A SOA would help in assessing where your money is going. Sounds like too much outgoing rather than too little incoming which means you'll more than likely rack up similar debts again. You must have a pretty decent income to get 70K of debt so have you been trying to live a lifestyle you cannot afford or can things be salvaged?

Money_maker

Here's the SOA link http://www.stoozing.com/calculator/soa.php

System

I would sell if i were you. thays not from an experienced/ professional perspective but more so that you still have the house and good equity.
best to sell before the debt goes larger or you can no longer afford the payments then you lose the house to the bank/ creditors anyway.

How old are the children? If theyre leaving home in next 5-10 years then you can rent for that time then once theyre gone and your finances are sorted youll only need a small house/ flat which you can buy.

elsien

Do you know how/why you've managed to rack up the debt? Because the last thing you want is to sell the flat, pay it off, then end up in the same position a couple of years down the line.
Plus you need to take into account the costs of renting. It's likely to be higher than your mortgage, so if you're having difficulty managing now can you afford to rent?

System

We would be looking at a 1750plus MTG 350 =2100 a month currently down to 1200-1300 a month ren't payments

I think that means they are paying £2100 on minimum payments and mortgage now. if they were to rent theyd be paying £1200-£1300 so that gives them £800 better off plus theyd save on insurance and homeowner costs.

If they just continue making minumum payments that theyre already struggling to do thats gonna go on forever??

System

On a previous post you said the debt was 95k , or was that a mistake . You were looking at an IVA , how did you get on?

Fireflyaway

I'd be cautious about selling your flat. If you have debt and other financial issues you might find it hard to get on the property ladder again anytime soon. Think of the long term plan, not just your current situation. We sold our flat of 12 years as like you it was too small with a family. We are now renting until our credit improves in order to buy. I love having more space ( 3 bed house) but I feel vulnerable. The first place we rented we were asked to leave after 10 months as landlord wanted it back! The longer you or I delay buying, the older we will be when the mortgage is paid! In your situation I'd be asking myself how disciplined are you? If you can settle your debt and still have an emergency fund and deposit ready, go for it. Just be 100% clean as far as your credit goes or you might really struggle to get a mortgage and be stuck renting indefinitely.
For us it was worth it. The stress of being overcrowded was getting us down. We always went out ( which involves spending) to get away but now we are happy chilling in the house of a weekend.
Think about what you want to buy in future. Are there shared ownership schemes nearby? Could you move to a cheaper area? Would 2 rooms be enough? Just have a plan so you don't drift! We have now been renting 2 years and I'm so worried we won't get approved for a mortgage. Fingers crossed. Good luck whatever you decide!

nkkingston

Honestly, if you're interest only I think you might as well sell, since it's not actually an asset - when your mortgage term is up you're going to have to either sell it anyway or suddenly find enough money to pay off the balance, which given your current debt levels seems very improbable. You're in a scenario that's no doubt cheaper than renting, but is still just throwing your money away. You really need to figure out how to live within your means, though, otherwise that debt is going to rack up again and keep you off the housing ladder indefinitely.

PasturesNew

Normally I'd say never sell... hunker down and ride it out ... but it might be that in your case that's not reasonable as your space requirements have changed. On the other hand it could be your expectations and aspirations have risen.

As well as an SOA, it'd help to understand the space you're working with... maybe you've got two large bedrooms, too much stuff and too little good storage and could solve it by giving the kids the bigger bedroom with proper/good storage and getting rid of unnecessary clutter.

If you sell now you might have to face the fact that you may NEVER own again and if that's not your dream then you would need to fight it out now, rather than live with a lifetime of regret.

EssexHebridean

First stop before taking any steps as drastic as selling up is to get a full picture of where your money goes and how your budget works. Do you even have a working budget currently? How much surplus should you have each month and do you actually have this? Have you looked into whether any of the card debt can be switched to 0% deals?

The bigger worry to me is that you're in an interest only mortgage as I suspect in the long term this means that you have no hope of keeping the place anyway - as when the term is up (in 11 years, at a guess?) you're not going to have the money to clear it and selling will be your only option.

Step 1: SOA
Step 2: identify any savings that can be made and any cost cutting that can be done
Step 3: Work out precisely why the debt is there - and whether ultimately it was simply as a result of living above your means.
Step 4: Before going any further with the idea of selling up a) discuss every aspect of it including as is said above, what happens if you are never in a position to buy again, how that sits with you and b) Get that budget actually working for you and make sure that you think on each and every occasion before you spend.