Sell house to clear debt & start a clean slate

Legacy_user

Hello all,

Just like the title says

Retireby40

If you move into rented accomodation by the looks of things youl never buy again. Or you will never be able to buy again. You say your salary is more than when you bought but you've still got big debts.

What is your monthly income and what are the outgoings? Why do you have so much debt.

Retireby40

You claim now things are so tight. Rent is usually more than a mortgage. At such a young age you have a high value house. And you's got a mortgage so it must have been after this your spending changed? You can't have had 65-70k debt when buying. So how has it built up so quick?

kazwookie

I would work out how to get rid of the debt with out selling the house, once off the housing ladder I think you will have trouble getting back on it.

What caused the debt?
Can you do a SOA

[Deleted User]

Why would your father have to look after the £45k?

Doozergirl

Your mum is right.

What's the story behind the debt?

Selling your house removes your key security and it doesn't address, unless there has been some personal catastrophe, the reasons why you're in this situation and won't prevent it happening again. Edit: just seen your update. No catastrophe, just a historic snowballing of constant overspend resulting in the end of the credit line. Getting married last year will have compounded the issue.

I'd go to the Debt Free Wannabe forum and have a look at debt management options available, but it sounds like you need a lightbulb moment or that £45k will disappear too.

What is going to change from this point, where you're in debt crisis, to you putting money away in savings each month?

I have a friend who did solve her debt problems by selling up, but she's not got back on the property ladder after around 10 years and her place would have doubled in value since.

People who went into a DMP, or similar, over the same period of years would have kept their house despite losing the credit rating, learned to budget and benefitted from price rises. The credit rating is unimportant in that time.

I would not be giving up a house, regardless of thinking I would be happier elsewhere, to go into rented. It's a whole other ballgame when you've already owned a house and hugely more expensive - at least your mortgage payments are paying off the house, not someone else's.

It seems like an easy option but you will make yourselves poorer for it. And if you don't manage to address the overspend, it could get a whole lot worse - back in debt with literally nothing to show for it.

Debt free wannabe board:
https://forums.moneysavingexpert.com/forumdisplay.php?s=&daysprune=&f=76

Doozergirl

Lucielace wrote: »

We had debts before buying, but then had two children close together in age which meant our spending went higher and I was on mat leave for 18 months altogether so in a short time we just wracked up debt & we got married last year.

So why don’t you think we will get back on the market?

We bring in a month roughly £3200
Our rent would be around £1000
And our bills etc would come to around £1000
Leaving us with around £1200 disposable income including food.
So we plan to save half into savings we can’t touch I.e where the 45k will be and the other half into saving so we can enjoy holidays and birthdays etc.

So how much is your mortgage now? And how much of that is capital repayment?

As a very vague comparison, our current mortgage is just under £700 a month, which probably isn't far off yours. At least £400 comes off the mortgage balance. £1000 wouldn't rent us the same house at all but we could fit into a house that rents here for £1000.

The equivalent of £1000 a month to a landlord would be to me:
£300 mortgage interest
£400 'savings' in our home
£300 to spend/save/put towards debt.
Plus I live in a bigger house

It's imperative that you do a State of Affairs and not knee-jerk into paying off your debt in one go at the expense of your future.

Onemanandtwolittleladies

Agree that selling your house is the wrong move.

Let’s be honest, you’ve got a lot of debt and you’re just looking for the easy way out of it, i.e sell the house and pay it off. That way you don’t have to sacrifice anything and cut back to pay it off, which is the hard way but would leave you far better off in the long term.

Onemanandtwolittleladies

Plus you’ve got the associated costs of moving into rented, then potentially buying another house, stamp duty, conveyancing etc when you are in a position to buy again. Plus in that time you’ll have paid precisely nothing off your mortgage as if you’d stayed in your house. Absolute madness imo.

ACG

Reading your posts on this thread, I think there is some sort of bigger issue surrounding money.

You have consolidated debt, but still racked up more.
You have entered a DMP.
You need your dad to look after your money.

The first 2 could make sense with the situation you describe (ie having 2 kids and needing to go off on mat leave), we have a 2 year old and even with me working from home some afternoons childcare is still ridiculous, but then when you add in the third, it just looks like money burns a hole in your pocket.

I can not write this without it sounding condescending, it is not supposed to but why as adults are you not capable of having money without spending it? You could probably do with looking at how you deal with money, that could also be a good thing for when you are teaching your kids about money.

You then have the other possible issues:
- How much will rent be by comparison to the mortgage/debts?
- What happens if something happens to dad?
- How do you explain to the underwriter the deposit is yours (not a gift) and you asked dad to look after it because you can not trust yourself not to spend it?
- Possibly the biggest question, will there be other excuses if you start building up debt again? (We are doing it to build our credit score? We needed to go on that holiday/get a new TV/It was such a bargain, it would have been stupid not to...).

Again, this is not mean to sound condescending but as mortgage brokers, we have to be on the lookout for people who have a habit of building up debt and then securing against the house and your post has a lot of the warning signs. Sometimes it just helps to help for someone (me on this occasion) to point it out... On the other hand, sometimes it just offends, which is not the intention.

If it is purely circumstances, then just ignore this post but sometimes it is easier to blame circumstances than look at the actual problem. It is more the fact you are looking to ask your dad to look after the money that would be a concern of mine.

AdrianC

Lucielace wrote: »

Just like the title says, we are in the process of selling our house to clear debt and start a clean slate.
So here are the stats :
I’m 26 my husband 31
Our house is worth £250,000
Our mortgage is £135,000
So we are left with £115,000
Our debts total around 65-70k

We are on much more money now than what we where before getting on the property ladder (which was hard)

Let's assume you have a household income of just £40k, 2 x £20k.
After tax, that's an income of just over £2,800/month.
A £135k mortgage is probably costing you a bit under £800/month.
That's leaving you £2k/mo for the rest of your life... Yet you've run up £65k of debt in a few short years, and you're now earning more than you were while that was being run up.

Now, it looks to me like - at the very simplest - you'll be £200/month worse off by paying rent. And you're already tight after bills? OK, so you won't be paying anything to maintain the property or for buildings insurance - but I doubt you're spending £200/mo on those.

It seems to me that your best bet is to head over to the DFW forum, and do a full statement of income and expenditure.
https://forums.moneysavingexpert.com/forumdisplay.php?f=76