Sell house to clear debts and 2nd mortgage?

pbmbelfast

Dear all, I am desperate for advice having fallen into extreme debt over the last few years. Here is my situation:

I bought my mother's house five years ago and took out a fifteen year mortgage on it. At that time, I was still living there and still paying off debts accrued from my student days.

When I started to get on top of these, I then bought my own house and moved in two years ago.

I got this house for a great bargain of 102000 - and now houses in my street are being sold for 195000.

However, by trying to pay the mortgage, insurances, rates etc on both houses, I fell horribly into debt.

Here are my current outgoings and salary:

Salary: 1800

Loan 1: 280

Loan 2: 130

Loan 3: 70

Credit Card: 90

Mortgage 1: 580

Mortgage 2: 320

Rates: 102

As you can see, this leaves me with little under 200 to live on.

I have decided that the only solution is to:

1. Sell my house

2. Use the profit to clear the first & second mortgages: first one is now at 25000, the one on the house I'm selling is interest only and is STILL 102000. Which means I just rent from the bank.

3. Use the rest of the profit to clear ALL debts.

THEN, I will rent for a year, debt-free, and be able to put away at least 500 per month.

After that, I then use the deposit to buy a house.

Does anyone think this is a good idea, or should there be something else I'm doing?

All advice very very gratefully received.

Thanks

Paul

hypno06

Hi there - and welcome! There is a sticky at the top of this board for new posters - have a look at that and if you could put together a more detailed statement of affairs, then there would be far more info for the DFW community to comment on.

Also, have a look at the snowball calculator on www.whatsthecost.com and have a play around with the figures there - it might focus your mind a bit.

Presumably with the first house, your Mum still lives there, and you are the owner, so the equity is yours? You wouldn't be selling this one, would you, so you would still retain an asset, even if you sell the house you are currently living in?

PasturesNew

You make it sound like you are living in one house - and have your mother's house sitting empty. Why is that?

silvercar

With house prices the way they are, I think it is a very good idea to sell now.. That £195k valuation could fall by spring; get out now and pocket your profit.

Dumb_Blonde_3

Is your mother still living in the house you brought? if so could you move back in with her for a while and rent out the other house?

webtalk

rent out one of the houses.

tyllwyd

Your post doesn't make your situation very clear - you seem to own two houses, but you have no income from either house, and you are paying bills on both. Is that right? On a monthly income of £1800, that seems amazingly over ambitious.

I think you are right to try to cut your bills down so that you are only paying out rent/mortgage on one property per month, so if you can sell one house and use the equity to clear the other mortgage, that seems like a perfectly sensible option. You still own one house, so you won't get left behind if property prices continue to rise (and if they fall, then selling the second property will have been a good idea).

pbmbelfast

Thank you so much for all your replies.

In reply to some of your queries - I am the sole owner of both houses.

My Mum still lives in the first house.

I live in the second.

I realise that I am being over ambitious - and think I am doing the right thing by selling - clearing both mortgages, paying off debts with rest of equity, and then renting for a while to save enough to purchase again.

Toto

I think that's a very good plan. I sold my house to clear our business debts and it's the best move I could have made. Instead of paying £2000 in interest every month that money goes into savings instead and my rent is 2/3 of what my IO mortgage was for a bigger nicer house.