Should we sell to clear debt?

kahlo2016

Hi All

I'll try and keep this brief, but not leave anything out.

We own a house worth around £580k. Our o/s mortgage is about £168k. We have 3 teenage kids.

We have debts of around £70k - mostly related to our business. Most of this debt is loans though so will be paid off in around 3 years. We have a retail business which does ok and would earn us enough to live on easily if we didn't have any debt repayments to make.

As it is, we don't really have any disposable income at all. We don't go on holiday and we don't run a car and although we live a happy life, I'm wondering if we're crazy to live such a belt-tightening life if we could sell the house and clear everything.

If we sold, we'd have to rent as the equity would not be enough to buy another house. We also don't earn enough to get another mortgage. We could, however, buy a flat outright and rent it out.

We'd have to pay around £2k pcm rent (London) and would get around £1k in rental (although obviously this is not guaranteed). Our mortgage is currently £1k and we pay around £1600 per month in debt repayments. We would be better off in cashflow terms, but we'd end up with a much smaller asset (which would be our only asset, apart from the value of the business).

Would it be better to sit tight and ride the storm for the next few years, or be debt free and have money to call our own?

Opinions very welcome!

Durban

Sit tight and ride the storm

Brodiebobs

sit tight. You have a massive amount of equity.

If you can support the additional, and happy to put business debts onto the house would a extended mortgage be an option?

chelseablue

As above, don't do it

Jox

Things will be better in 3 years when the loans are paid off

Skiddaw1

Another vote for sitting tight.

BrassicWoman

sit tight

do you both make a good living from the business or would you be better with one working elsewhere?

hazyjo

Sit tight.


Saying that, do you need to stay in the area you currently live? Is it a local shop you own, or something in central London you could commute to?


Forget the flat/rental idea - if someone stops paying, trashes it, and/or you have to pay to evict - not to mention the lost rent - you'll be up the creek without a paddle and in a far worse state.

AdrianC

kahlo2016 wrote: »

We own a house worth around £580k. Our o/s mortgage is about £168k. We have 3 teenage kids.

We have debts of around £70k

Will your income allow you to remortgage for £240k, repaying the £70k debts, and still giving you a very low loan-to-value of just over 40%...?

Thrugelmir

kahlo2016 wrote: »

I'm wondering if we're crazy to live such a belt-tightening life if we could sell the house and clear everything.

Sit it out. In the years to come you can enjoy the rewards from your labour of building a successfull business.

RelievedSheff

Another vote for sitting it out.

You would only regret selling your family home and in three years, which is no time at all, things will get easier.

Trust me three years will fly by.