Selling house to pay off debt? good idea or bad?

Tee25

Hi

My and my other half are up to 70k in joint debt on Credit cards due to a lengthy period of being self-employed. We now both have full-time employment and collectively bring in 100k per year (before tax).

I know that sounds a lot but credit card payments are crippling us. We pay up to 2k a month on minimum payments and the debt is going nowhere. Also, I have a very poor credit rating due to missed payments on credit cards over the past few months.

We own a house and have would gain £250,000 or so from the sale once we paid of the remaining mortgage. The house we are in is now too small for us (we have 2 kids and a dog) and we are looking at moving but my poor credit has left us with little chance of moving to a bigger house which cost more than this one.

I so badly want to end the rut of being in debt and wipe the slate clean for both of us. So my question is, should we sell the house and rent somewhere for a bit, the money we make would pay off all our debts and also give us some towards a deposit for a new home in the next few years.

Willing2Learn

Have you addressed the inherent weakness in keeping to your monthly budget that led to 70K debt in the first place?

Any chance you could complete and post up your SOA please?
http://www.stoozing.com/calculator/soa.php

JayRitchie

as noted above its best to post an SOA.

Which area are you in? Would selling up allow you to buy somewhere else which is cheaper? I generally doubt its worth selling in most cases - renting is not always a great thing with children and if you have lots of debt and a bad credit history you might struggle to buy again.

Tee25

The debt came from holding out on being self employed for 6 + years and having an eratic income. I realise where it came from and have now started budgeting

Tee25

JayRitchie wrote: »

as noted above its best to post an SOA.

Which area are you in? Would selling up allow you to buy somewhere else which is cheaper? I generally doubt its worth selling in most cases - renting is not always a great thing with children and if you have lots of debt and a bad credit history you might struggle to buy again.

We are in Hertfordshire. We are looking at moving to North herts where you get more for your money. We could sell our house for £450,000 and then look at buying something cheaper to pay off most of the 70k debt. This is not taking in to account stamp duty moving fees etc

Energize

My question would be why are you struggling to pay £2k a month when your take home pay should be in the region of £6.25k, even taking the mortgage payments into account on a £200k mortgage there should be ample money left over and it sounds like this is an aspect that needs addressing going forward.

JayRitchie

Energize wrote: »

My question would be why are you struggling to pay £2k a month when your take home pay should be in the region of £6.25k, even taking the mortgage payments into account on a £200k mortgage there should be ample money left over and it sounds like this is an aspect that needs addressing going forward.

Thats the reason for looking at an SOA. If the OP has had credit problems they could be averaging 30% interest on a debt of £70k - which would mean the £2k payments are having no impact in reducing the balance.

enthusiasticsaver

No I would not advise selling up to address debt problems. Moving is expensive and if you have a poor credit history you won't get a good mortgage deal. Renting is often more expensive than a mortgage.

Address your debt issue by budgeting and sorting out your overspending now you have a regular income.

theoretica

Tee25 wrote: »

We are in Hertfordshire. We are looking at moving to North herts where you get more for your money. We could sell our house for £450,000 and then look at buying something cheaper to pay off most of the 70k debt. This is not taking in to account stamp duty moving fees etc

Any plan you are seriously considering must take everything into account.

Unicorn_cottage

Hi Tee25

If you feel comfortable and to help us get a better idea of where your money is going and for us to suggest savings etc you may want to fill in a statement of affairs http://www.stoozing.com/calculator/soa.php - format for MSE!

This will help focus your mind to get the minimum payments upped so you can start to snowball the debts and get rid of them asap.

Selling your house should be the last port of call for you. Am sure you can knock this debt on the head with focus and determination.

Good luck!

Good luck!

System

Generally speaking, no never sell your house to pay of debts.