Should I sell to clear debts?

Worriedexswworker

Hi...newbie here so please be kind! It's a bit of a story....so I am 51. Divorced at 46 with 2 almost adult kids....we were lucky to have a lot of equity in the marital home and split it 50/50. This meant my husband could buy a 2 bed doer upper outright. I had to buy a 3 bed as had both kids and ended up with a large mortgage  following a house move, helping kids, no maintenance etc etc (120k not that I am bitter!!!). 

 I know I wasn't the best at money management, there were reasons for that and I have recognised and addressed them. My outgoings were covered by my salary as a social worker but I hated my job. It came to a head  in May and I realised if I stayed working as a SW I would probably end up very very unwell. I only ever stayed for the money and then ended up buying stuff to make myself feel better etc. Which of course never worked. I knew I had debts (car, credit card, loan total 15k) but as I could make payments it was OK.
Atm I am not working....have just got another job which is decent pay for where I live but no where near what I earnt as a social worker. I have done the budgeting spreadsheet, know where I can cut back etc and will be OK on new salary now I have faced my issue. But the outstanding debt scares me....I don't know what to do. Spoken to stepchange but as I was meeting repayments they have no advice. For now have spoken to mortgage and car people and payments reduced. I have about 45 k of equity in my house and a long time yet on mortgage. I don't know whether to sell...pay off debts and go into rented. Could get a rented property on a similar rent as my current mortgage. I could then invest the remainder. 

I feel such a failure and literally don't know what to do for the best financially. 
Any perspective would be welcome. 😊

Sky_

Personally I'd fight tooth and nail to keep my house, especially if you are unlikely to be able to buy again and selling will mean you have to pay rent in retirement.  I might consider downsizing, but not with only 45k equity, as you wouldn't be left with much after selling fees etc.

If your debts are unsecured, could you address them separately from the house by seeking advice from one of the debt charities, once you're settled in your new job?

Jude57

I'm no investment expert but I doubt you'd make as much in interest or dividends as you would in equity over, say 5-10 years, so I'd be wary of getting off the property ladder. I'm sure you'll have thought of other ways to increase your income such as getting a lodger? Depending where you live, you might find a Monday to Friday lodger, or a foreign student who'd be glad of a room. This wouldn't be forever and you can earn up to £7,500 a year tax free. See https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme for more info. Even if you threw only half of that extra income at your debts, it would make a good dent in the total. I realise letting a room isn't for everyone but worth considering?

Another possibility is that if your children are about to fly the nest, could you downsize to a smaller, cheaper property? Again, depending on your location, a one or two bedroom flat/house could be much cheaper to run, especially if you have a reasonable deposit. It doesn't sound as though you need much budgeting advice but I'd still recommend putting your SOA up here because I can bet the regular posters can think of lots of ways to cut costs and improve your situation.

Finally, don't beat yourself up. A friend of mine was a social worker and many years ago I, briefly, considered it as a career change. I shadowed my friend for a week and that was enough for me to know I couldn't do it. There's no shame in admitting something isn't for you, nor in taking care of your own mental health. You've had some big life issues to deal with and you've come through. You'll get through this bit, too and the regular posters here can and will happily offer advice and help if you want it. Good luck in your new job!

Worriedexswworker

Thanks for the reply. I did downsize a few years ago after the kids left. But still carried on with the pattern of spending. Totally my own fault I know. I have always been scared of money and have avoided dealing with it. But obviously that can't continue and no more ostrich for me!! 
I am not sure what to do about the debts....whether to try and renegotiate a repayment plan etc or to just continue with them as they are. I want to try and protect my credit rating as much as possible. Am selling as much as I can sell and looking at ways to increase earnings etc by side hustles if possible.

MalMonroe

Hi, I'm sorry to hear about your struggles but please know that you are in a better position than a lot of others and you are now addressing your problems by outlining them here. I know what it's like to struggle as a divorced person, as mine is a similar story.

I would advise you, in the first instance, to contact StepChange - a free service and a free phone call to help people in your situation. They helped me so much, I can't tell you. Anyway, the good thing is that you have already prepared a statement of account, so do have that to hand if you decide to call them. Please do not feel embarrassed or ashamed, there are many of us on this forum who have been in similar positions and we needed help, not judgement. You won't be judged by anyone at StepChange. I found they put my mind at ease, were very kind and helpful and did not judge me at all. They suggested a solution which they felt was best for me and it was. It's taken a few years but I'm now debt free and in control of my own money and budget. Best phone call I ever made.

Here's the link, give them a try. You won't regret it at all. https://www.stepchange.org/

Even if you decide not to accept what they suggest, you will have lost nothing. But they do talk a lot of sense. And they are kind! (Did I mention that already ....)

Good luck. But I'm sure you won't need it, you've taken the first steps and now it's just upwards, all the way.   

Jude57

MalMonroe said:

Hi, I'm sorry to hear about your struggles but please know that you are in a better position than a lot of others and you are now addressing your problems by outlining them here. I know what it's like to struggle as a divorced person, as mine is a similar story.

I would advise you, in the first instance, to contact StepChange - a free service and a free phone call to help people in your situation. They helped me so much, I can't tell you. Anyway, the good thing is that you have already prepared a statement of account, so do have that to hand if you decide to call them. Please do not feel embarrassed or ashamed, there are many of us on this forum who have been in similar positions and we needed help, not judgement. You won't be judged by anyone at StepChange. I found they put my mind at ease, were very kind and helpful and did not judge me at all. They suggested a solution which they felt was best for me and it was. It's taken a few years but I'm now debt free and in control of my own money and budget. Best phone call I ever made.

Here's the link, give them a try. You won't regret it at all. https://www.stepchange.org/

Even if you decide not to accept what they suggest, you will have lost nothing. But they do talk a lot of sense. And they are kind! (Did I mention that already ....)

Good luck. But I'm sure you won't need it, you've taken the first steps and now it's just upwards, all the way.   

The OP has spoken to StepChange as mentioned in their first post. StepChange are brilliant but, as I regularly point out, can't help if you can meet your contractual payments so it's best not to give posters unrealistic expectations of what they can do.

gizmo111

Have you thought about doing Form F's, to earn extra money?

TheAble

Sky_ said:

Personally I'd fight tooth and nail to keep my house, especially if you are unlikely to be able to buy again and selling will mean you have to pay rent in retirement.  I might consider downsizing, but not with only 45k equity, as you wouldn't be left with much after selling fees etc.

If your debts are unsecured, could you address them separately from the house by seeking advice from one of the debt charities, once you're settled in your new job?

Yes, selling up and moving into rented accomodation would be a disaster. You'd be approaching retirement at the mercy of future rent rises which you'd have little control over and landlords wanting to sell up and you having to move etc. I can't imagine you'd want that, and as has been pointed out you would struggle to get back on the housing ladder.

Worriedexswworker

Thanks everyone. I was at the point of not being able to see the wood for the trees and your comments have really helped. Revised my budget, worked who I owe and interest rates and a financially savvy friend is going to help me reduce payments if possible. 

Re doing Form Fs for extra....Good idea in principle, but my job before I left was full time form Fs. I literally cannot hear about anyone else's abuse history or trauma, I can't analyse or risk assess any more. I have come off the SW England register as I don't want to practice and don't want to pay membership or record CPD. It's a good way to earn extra money....if you not already a burnt out husk suffering from vicarious trauma!!

enthusiasticsaver

I would not sell as you are unlikely to get another mortgage which will be affordable at your age.  You only have about 20 years or less before retirement and £45k equity is not huge. Going into rented is less secure and eventually hopefully  close to retirement age the mortgage will be gone and you will feel the benefit of that when on a lower income.  On the plus side interest rates are low and likely to  stay that way so presumably the mortgage is affordable. So I would continue to pay the mortgage for now and not worry unduly about the outstanding balance.  You may be able to sort it out when you retire.  Do you have an occupational pension?  If you were a social worker the chances are that you had a local government one which is presumably now frozen? 

Good that you have done a budget spreadsheet and as you have gone through a divorce the likelihood is that money is tighter so you do need to adjust your spending.  If you are able to pay all monthly payments a DMP  is unlikely to be a good way forward for you so I do not think stepchange is appropriate.  The only caveat to that is if you are not putting money aside to pay for emergencies, car repairs, insurances etc and you are having to use credit to live. If this is the case the likelihood is that debt repayments are too high for you but if you are satisfied you can live within the new budget it sounds like it is more sticking to the budget that may be a problem rather than the debts being unaffordable.  Divorce plays havoc with finances.

I would concentrate for now in clearing the outstanding debt and living within your budget.  £15k is  not huge so hopefully it will not take you long to clear it then things will look better.  I find it strange that you are the one who put a roof over your kids heads but only got 50% of the equity.  How old are they and are they working? Do you ask them for housekeeping as your circumstances have changed?  My sister was in the same position as you.  Divorced with two adult children who have both lived with her after the divorce until fairly recently.  The equity was split 70/30 in her favour as she was a lower earner than my ex BIL  and although the children  were 18 and over  they were not  yet financially independent and he got his pension split 70/30 in his favour.  It was done amicably though

Worriedexswworker

enthusiasticsaver .  I find it strange that you are the one who put a roof over your kids heads but only got 50% of the equity.  How old are they and are they working? Do you ask them for housekeeping as your circumstances have changed?  My sister was in the same position as you.  Divorced with two adult children who have both lived with her after the divorce until fairly recently.  The equity was split 70/30 in her favour as she was a lower earner than my ex BIL  and although the children  were 18 and over  they were not  yet financially independent and he got his pension split 70/30 in his favour.  It was done amicably though

Thanks for your reply.
I guess it was my fault re the finance split. We didn't involve solicitors. It was a long marriage and it was my choice to end it so I guess I felt guilty.  I asked him for more, saying I would pay it back when kids left home but he said no. At the time I just wanted out and so I didn't push it. Hindsight is a wonderful thing I guess. Both my kids have now left home, they did pay board, but they had money for travelling from me when I downsized. Its all part of the bigger picture of me not looking after myself and putting others first. Realised financially I do that too...so obviously I have reached the limit on that in same way I reached the limit in being a social worker. Time to look after me now - finances included.