Sell house to pay DMP but also move house

DoOrDie

Hi Everyone,
this is my first thread and i would like to hear anyone's experience in this matter.
Ive just setup a StepChange DMP for my debt totaling £55k.
I have a house worth £320k with a mortgage of £225k
So my equity is enough to pay off my debt. Though at the moment i cant re-mortgage to release this money and my only option would be to sell.
I am also on a good salary £70k with my partner hopefully going back to work which might bring in £12k to start with.

My plan is to sell the house within 2 years of starting this DMP. Pay off 75% of the debt (or as much as possible). Leaving at least £40k to enable me to get a new mortgage for me and my 3 kids.
Though on paper - i can afford the new mortgage and would have the deposit (potentially). What are the real life experiences that anyone has had in this spot?

My current DMP would take 9 years to clear if i just sit still in my house.
I have a need to move house at the moment and ideally i want to sell to clear all and start fresh as soon as possible.
Just need some help from people. These threads have been amazing to get insight when i decided to setup my DMP. If anyone wants to ask me questions towards why i set up a DMP on £55k and how i got there im happy to talk.

Many Thanks.

Doozergirl

You're better on the Debt Free Wannabe board. Really, you're just consolidating the debt into yet another debt and that is part of the debt cycle. You need to break that cycle, don't gamble your home on it and just concentrate on paying it up. If you're on a DMP, to be frank, it's 0% interest now.

Your credit rating is already shot and it is going to be shot for the next 6 years, so any new mortgage, will be at much higher rates, so you'd really be increasing your debt burden. It also costs several thousand pounds just to move house.

Your DMP may be 9 years (at the moment) but adding it to a mortgage is increasing the term even further.

I cannot reiterate enough that eating into your equity is not paying the debt, it is simply a balance transfer using your primary asset. Do not do it.

I have a friend who sold up to pay off debt and still isn't back on the ladder several years later. I also have friends who seem to repeatedly remortgage to pay off accumulated debts. They must owe a lot more now than they bought their house for and the credit cards are still in use. They'll get to the point you are, eventually

Why do you have a "need" to move house?

Doozergirl

Put yourself forward 9 years. It seems like a long time but you'll be debt free and your mortgage will also be less than it is now. You'll feel good.

If your other half starts working then it will be considerably less than 9 years.

Cakeguts

If you are on a good salary why will the current DMP take 9 years to clear?

Thrugelmir

Are you intending to downsize?

[Deleted User]

DoOrDie wrote: »

Hi Everyone,
this is my first thread and i would like to hear anyone's experience in this matter.
Ive just setup a StepChange DMP for my debt totaling £55k.
I have a house worth £320k with a mortgage of £225k
So my equity is enough to pay off my debt. Though at the moment i cant re-mortgage to release this money and my only option would be to sell.
I am also on a good salary £70k with my partner hopefully going back to work which might bring in £12k to start with.

My plan is to sell the house within 2 years of starting this DMP. Pay off 75% of the debt (or as much as possible). Leaving at least £40k to enable me to get a new mortgage for me and my 3 kids.
Though on paper - i can afford the new mortgage and would have the deposit (potentially). What are the real life experiences that anyone has had in this spot?

My current DMP would take 9 years to clear if i just sit still in my house.
I have a need to move house at the moment and ideally i want to sell to clear all and start fresh as soon as possible.
Just need some help from people. These threads have been amazing to get insight when i decided to setup my DMP. If anyone wants to ask me questions towards why i set up a DMP on £55k and how i got there im happy to talk.

Many Thanks.

I'm not sure how easy you will find it to get another mortgage 2 years into a DMP. Your credit files will have a lot of defaults and arrangement to pay markers splashed all over them so you definitely won't be looking at high street rates if you can even find a willing lender.

What is driving the need to move? Do you need to move areas for work/schooling/be closer to family or do you want a different property type in the same area?

DoOrDie

Thanks All.

I want to clear the DMP as fast as possible so i can get back to normal. I have thought about selling and going back to rent for a few years but i know any defaults will still be with me for 6 years. And i dont want to be stuck back in renting for 10 years (even though i would be debt free and have £40k in savings).

I agree its best to sit still and pay off the debt at this rate but i have 3 teenagers, a crampt house and needs for everyone to get to college, school work and the area we are in is not the best.
I am looking at properties at the same level in another town but need some mortgage advice:

Would a lender look at me if i sold my house. Closed my DMP with the sale. Had surplus left over for the 15% deposit and with my salary x4 ratio be able to afford the new mortgage.
Or are they likely to say no because the DMP shows bad management and they wouldnt want to risk it.
In 6 years time all my kids will be adults so my outgoings will reduce and i can downsize etc.

Also another question, i have a fixed term mortgage with natwest for another 2 years. When this ends will i enter the variable rate with no choice to renew an agreement? Im worried i could go from 1.5% to 4.7% and my costs could make it affordable to keep the house.

to answer: If you are on a good salary why will the current DMP take 9 years to clear?
Simple, 3 kids, partner not working, high costs to support (i.e. electricity, gas, water, food)
My salary leaves me with £500 a month spare which is now in the dmp.

Thank you all.

Doozergirl

When your fixed term ends, you should check your mortgage terms, but it is likely to go to SVR. It is one of Martin's crusades. Deal with that in 2 years time when your defaults will be older and you can probably get a better rate.

Lenders would not look at the fact that you are going to pay off the DMP immediately with any more favour than if you were simply trying to manage the DMP and pay it off slowly. NatWest will probably decline to allow you to port the existing deal to a new house because your circs have changed, so you in order to move you are likely to be looking at sub-prime lenders at rates in excess of 3%.

Go and speak to a broker. You will at least know what your options are.

Fact is, you are currently considering spending more money to get yourself out of a hole, but hiding it in the form of more debt. 4x salary now on a mortgage? You are simply delaying the inevitable.

You need a lightbulb moment, but you have to get there yourself. Please go to the Debt Free Wannabe board and speak to people who have been where you are. They'll also guide you to getting to the best place as quickly as you can, and they'll help you cut costs where you can. It will not be all that quick, but it won't be as painful as it could be. It took you time to get here, it takes time to get back.

If you don't address this now, you will be back here in a couple of years in a worse position, with no equity to bail you out. And you'll wish that you did the right thing at this point in time as the journey will be made longer.

I have teenagers in this house. There are presently 6 of us in a 4 bed house (when you count our son's girlfriend) and most of the time you wouldn't know anyone is in the house as everyone is in their rooms. My daughter has over an hour's commute to school and we leave at 7.05 every morning. I had to drive my son 15 miles to college every morning too and some mornings leave at 6am to get him to rugby training at the premiership ground and then back to collect DD. It's not such a massive deal if one parent isn't working. It doesn't last forever either.

You don't 'need' to move house. You are deflecting the main issue.

Cakeguts

When your partner goes back to work you will have another 12k to put into the debt on top of your £500 a month or had you thought that the extra money would be all for spending?

ACG

Ive not read all of the replies.

The reason for the DMP is not really important - it might get questioned but typically they just want to know, I have never known any reason to be a problem.

Get a good experienced broker. There are lenders out there who may do it for you. It is unlikely you will be getting high street rates but all being will something under 4% for a couple of years.

DoOrDie

Quick Thank you to all.

Obviously i dont want to take on more debt to get out of debt. I do see a mortgage as not a debt but an investment.

Ideally im trying to save what i can for the next 2 years, then make a deal with the banks.

My idea is to call the banks and ask for a settlement figure to close. Based on if i sold my house i would enough money to pay off the debt and have 40k deposit for a new place.

I can haggle with them that if they give me an agreed settlement i would sell and pay up. if not i'll stay put.

Yes i agree i would only get a sub primie mortgage by moving but thats better than renting into dead money.