Would you sell property to clear debts?

beckysbobbles12

Hi all

I know this might seem like a personal decision but I think it's always handy to hear other peoples opinions.

My husband has a property that he rents out. We live together in my property. These have been kept separately. I don't want to get into the whole if we divorce business as hopefully it'll never happen.

He isn't the best with money. It's not that he spends loads, it's just he doesn't know when to save and has quite high outgoings compared to income (he has three other children to support).

He said he's considering selling his property so he can clear his debt. It would clear his mortgage, plus a loan I got out for him and then leave around £100k.

I've suggested he invests some of that in stocks and shares ISAs. 

The purpose of the house was just to have something to leave his kids in the future but I've explained life is for living, not struggling so hopefully without the mortgage it should help him out.

Although saying that the current rent he receives covers the mortgage and tax so he's flat on that.

I guess I'm just wondering what you'd do in his situation. I don't really have an opinion either way. 

gwynlas

For me it would depend on whether there is likely to be a huge capital gain if he keeps the house once the mortgage is paid off. Debts can always be paid down or paid off from the proceeds of sale even after his passing. Until he learns financial management skills it is better to keep an appreciating asset until such time as it is needed. You have purposefully kept your finances seperate until now though presumably unless you have made wills stating otherwise your assets pass to each other on death. If you are aging and could seriously make use of the £100K to improve your quality of life now that is a different matter and I would advocate selling.

beckysbobbles12

Thanks for replying. We've kept things separately as we've always said what we had before the relationship, will always be ours. I know it's only our word but I think we'd stick to it.

We're both late 30s/early 40s. I sadly don't see his financial management improving. I do worry that if he sells the house, then that's it. I don't rely on him financially at all. 

Keep_pedalling

Trouble is he would likely wipe out his debt then just build it up again especially as he will be on reduced income. 

fatbelly

If he's got good tenants then he can probably get a hea lthy return from having capital tied up in in the rented property.

What are the debts that he would be clearing from the proceeds of a sale?

beckysbobbles12

fatbelly said:

If he's got good tenants then he can probably get a hea lthy return from having capital tied up in in the rented property.

What are the debts that he would be clearing from the proceeds of a sale?

So far they are good tenants.

It was DIY on the property. I cleared the debt for him and he slowly pays it back.

fatbelly

Not high interest debt then. I think I'd keep the property

Richard1212

You seem to have very little say in anything your husband does with "his" money ( when most married couples usually consider the word "our"), you "got a loan for him", you seem to put up with a great deal without much equality. Before going any further, I think you should assert yourself, offer to take over his finances ( or get professional advice for a one-off fee as to what would make most sense in current situation). You say that your husband will always be paying out more than his income-----you have to stop this. Personally I think you may need counselling as to how you run your lives ( rather than "life") and manage your finances with a view to more equality and functioning as a couple in financial terms instead of being so far apart.

EssexHebridean

The fact that you've already "taken out a loan for him" and that you can't see his financial management improving are a couple of substantial red flags for me I'm afraid. I'm not meaning that in a "he's a bad lot - run for the hills" type way - but simply that he sounds like a prime candidate for being the sort of person who will actually benefit from being forced (even gently) to take responsibility a bit. You are at the end of the day his wife, not his Mum - and you shouldn't be bailing him out with loans or managing his personal finances for him - particularly not when he has an entire substantial asset which you both consider to be "his" rather than "ours". 

I'd suggest sitting down with him and running through ALL the finances - yours, the household, and his. Set budgets, make sure he's got a grasp of the amounts going out and the amounts coming in to cover. Agree on a set amount that you should be aiming to save each week, and help him set up transfers to ensure that this happens. Is he paying the loan at the same rate as the monthly payments, or paying YOU back below this level? If not because he doesn't have the spare income - then can you rejig budgets at all to ensure that he can start paying this in full?

The risk is that he sells the property, clears the mortgage, clears the loan, but then continues spending as he has been, and not saving. 20k goes away into an ISA (Although consider whether an ISA is needed if you don't have much other savings?) in year one, but then in year two, that gets forgotten, same in year 3, and by year 4 he's in the habit of just subbing his spending from that nice convenient pot of money... 10 years down the track it could feasibly have all been frittered and he's back to working "in the red" each month - only this time there is no asset to solve the problem. 

Another good reason for ensuring that he improves his grasp of the finances is what if something happens to you? Currently, do you think he'd be OK running the household budgets, or would he rapidly find himself in a big financial hole? He's a fully grown adult - and needs to start acting like one financially would be my take on your situation. 

enthusiasticsaver

If the rent he receives covers the mortgage, tax and he is managing to repay the loan you took out for him and has a budget for home repairs and other landlord expenses then I would keep the property.  If he does sell then investing in a stocks and shares ISA is good although obviously he can only put in £20k this year and another £20k after  April although if he has a pension he could invest in that too or overpay your residential mortgage? 

I have to say I would be a bit concerned if I were you giving he presumably lives rent free in your property and you took a loan out for him to do essential repairs to a property you do not have ownership over which suggests he is unable to access affordable finance himself. What other debts does he have? 

[Deleted User]

Has capital gains tax been factored in when his property is sold?

As detailed in this similar thread:

https://forums.moneysavingexpert.com/discussion/6473574/best-advice-whether-to-sell-property-to-clear-debt#latest