Should I sell my house to pay off my debts?

nicmogs

Hello, I'd like some advice, please. I have approx £35,000 in debt, I won't go into the hows and whys that happened as it goes back years. We are now both working with good salaries (£98,000) and I have a budget and arrangements in place with all my creditors, I have missed a few payments here and there so my credit score is still very low and can't get any finance for consolidation loans. The amount we pay out to each creditor is fairly small depending on what is owed and is going to take at least 5 years to pay off. We have a house worth approx £380,000-£400,00 (according to Zoopla) and a mortgage 0f £280,000 (interest only) we also have a 2nd mortgage of £25,000 (repayment). this means we have approx £75,000-£95,000 equity. My question is should we sell the house and pay off our debts and start again? should I try and get another loan on the mortgage with the equity? or we could sell up, rent for a short while and then possibly buy something cheaper (we live in quite a sort after, expensive area) outside where we live now or should I keep the house and continue paying the debts off for now? The house is in need of some cosmetic work, decorating and a new kitchen so I do need to spend some money on it. Would we get another mortgage after being in so much debt? We have always paid our priority bills so no problem there but I'm scared we won't get another mortgage and I don't want to rent for longer periods as the house we are in now does continue to go up in price every year giving us more equity, any advice greatly received! thank you

MovingForwards

Put up a statement of affairs and see if we can help you cut back more.

It sounds extreme selling up to pay the debt off especially as you earn good wages and it will only take 5 years to clear. Yes, it seems like a lifetime and a large debt to you, but you are in a good position to clear it.

Then you can do something about being on a mainly IO mortgage.

Unless you were looking to move and downsize?

nicmogs

thanks for the quick response! We were thinking of moving/downsizing in about 7 years time when our children finish school here, however, I just feel like this debt has been hanging over us forever and wasn't sure if we would be better off starting again with a smaller mortgage and on a repayment, I'm 47 so not getting any younger for a mortgage! or do we keep plodding on but never paying off the mortgage? whats a statement of affairs is that my budget?

MovingForwards

Stick with the house til the kids have gone!

As you say at 47 your mortgage term would be shorter if you started again.

Statement of affairs is your income / outgoings. There is a link around somewhere which you fill in and it works all the totals out for you

MovingForwards

Found the link

http://www.stoozing.com/calculator/soa.php

Don't forget you can always move all or part of your IO mortgage to a repayment one to chip away at it.

JayRitchie

nicmogs wrote: »

Hello, I'd like some advice, please. I have approx £35,000 in debt, I won't go into the hows and whys that happened as it goes back years. We are now both working with good salaries (£98,000) and I have a budget and arrangements in place with all my creditors, I have missed a few payments here and there so my credit score is still very low and can't get any finance for consolidation loans. The amount we pay out to each creditor is fairly small depending on what is owed and is going to take at least 5 years to pay off. We have a house worth approx £380,000-£400,00 (according to Zoopla) and a mortgage 0f £280,000 (interest only) we also have a 2nd mortgage of £25,000 (repayment). this means we have approx £75,000-£95,000 equity. My question is should we sell the house and pay off our debts and start again? should I try and get another loan on the mortgage with the equity? or we could sell up, rent for a short while and then possibly buy something cheaper (we live in quite a sort after, expensive area) outside where we live now or should I keep the house and continue paying the debts off for now? The house is in need of some cosmetic work, decorating and a new kitchen so I do need to spend some money on it. Would we get another mortgage after being in so much debt? We have always paid our priority bills so no problem there but I'm scared we won't get another mortgage and I don't want to rent for longer periods as the house we are in now does continue to go up in price every year giving us more equity, any advice greatly received! thank you

Hi

A few clarifications if I may:

- when you mention that the house needs some work is the value of £380-400k the price once the work is done or in its current state?

- where are you located? Its a very different proposition downshifting from a swanky executive area in Yorkshire with a house worth £400k than doing the same in the South East. Other than money would there be additional pros and cons of moving?

- do you have any major bills coming up such as replacing cars?

- How are your pensions savings? It makes a lot of difference if at least one of a couple is on a decent final salary scheme than if you have only small private pensions.

a_silver_lining

35k over 5 years is under £600pm repaid. That is very low on 98k worth of joint salary.

I would suggest doing an SOA to see if others could help with savings to help you pay it off sooner. It may be that you can cut it to 2 years and then be able to do up your house. Even 5 years isn't a massive wait to do up your house

nicmogs

The house is worth £380,000 now but with some work could then sell for about £400,000 possibly more.
We live in a seaside town in wales very near Cardiff city so a good area but there are some smaller villages and towns a little further away from Cardiff where house prices are less and we have lived previously before kids! The schools are very good where we live but my youngest has just over 4 years left before she leaves, eldest hopefully going to uni in sept, another reason for trying to sort out the finances as I know how expensive that can be.
We have just had to replace one of our cars and currently paying a loan off for it but it’s through family
We are both teachers so have pretty good pensions that come straight out of our salaries

kazwookie

You should be able to pay a large chunk off each month if the join salaries are 98K

How much are your out going?
What rate of interest is being charged on the debt?

Can you do us a break down as some one has already suggested.

Personally I would NOT sell the house, but cut back hard on everything (ie no holidays, no high prices mobiles, no takeaway, no sky, etc etc) and use the money to pay the debt.

suki1964

Never sell the house

You need to do a SOA, even if you keep it private, to see where your money is going, really going, because tbh 35k of debt should easily be serviced on your income without missing payments

However doing a SOA and posting in on here, will get you advice on where you are overspending and where you can make changes without dropping quality of lifestyle

JayRitchie

nicmogs wrote: »

The house is worth £380,000 now but with some work could then sell for about £400,000 possibly more.
We live in a seaside town in wales very near Cardiff city so a good area but there are some smaller villages and towns a little further away from Cardiff where house prices are less and we have lived previously before kids! The schools are very good where we live but my youngest has just over 4 years left before she leaves, eldest hopefully going to uni in sept, another reason for trying to sort out the finances as I know how expensive that can be.
We have just had to replace one of our cars and currently paying a loan off for it but it’s through family
We are both teachers so have pretty good pensions that come straight out of our salaries

Thanks for the response. A very different set of circumstances than I had expected - you are in a much better position than I had guessed. Will rethink a response!

Hopefully if you can post an SOA others will have ideas.