Sell to Clear debts, then rent??

sweetpeas_2

Hi everyone,
I wonder if I might get some advice on my little "dilema"...

We currently have approx £75k left on our mortgage, over another 26 years. We pay £479.12/month on this.
The house is worth approx £110k now.

I have been wondering lately if it would be financially benefiting to us if we could sell the house, as we could pay most of our debts off at the same time.

We have quite alot of debt- and i think if we could sell the house we could pay off most of the debt, leading to a major reduction in our outgoings each month. as, at the moment, we are really really struggling to pay things off each month with our wages, which are actually quite good. we both have second jobs to pay for food/any extras we might get.

does anybody have any info on this sort of thing? or has someone done a similr thing previously?

many thanks,
any advice would be appreciated.

X

pinkshoes

How much is renting a suitable/similar property? How much is the interest each month on your debts? How much are your debts?

If you're struggling to pay your debts and mortgage, then selling might be a good idea.

Don't forget the housing market is rather slow at the moment, so you might not get £110k for the house, so if it sold for say £99k, would you still be able to manage rent ontop of the remaining debt payments?

sweetpeas_2

A rental property would be around the same amount each month.
Im really not sure of the interest rates for the debts. Im useless with anything like that (probably why we're in such bad debt to start with...)

I'm not sure if it sold for less then £110 we'd be able to pay all the debts off as well. Something i've got to consider, if it's not worth doing it then whats the point?!

The debts are:
secured loan- 37k, around 29k left
loan hsbc- 9k left
lots of bits of debts, that we could handle fine if we didnt have the above 2!
to be hoenst, we could manage with the small loan payment as well, the 9k one, as its 181.31 per month for another 3.5 years. so we could cope fine with that. but the big loan is £464.85/month, and its like having a second mortgage tied around your neck. its only £15 less then our mortgage payment(!) :eek:

i think if we could pay off the mortgage and the big loan, wed be able to manage fine with the rest of the payments. because even if the rented property was £500-600/month, it would still be £500-400 less then we pay out monthly now.
all seems a bit simple to work out. am i missing some underlying costs or anything? been along time since we moved here and cant remember how it goes! sellers fees or owt? i dont think there will be solicitors fees with us not buying- but might be wrong there as well.

thanks for replying pinkshoes

xx

pinkshoes

You'll have to pay about 2% fee to the estate agent, then a HIPS (£300??), plus solicitors fees (allow £1000).

If you post on the DFW (debt free wannabe) forum, they might be able to help you a bit further with all your debts. There's a program on this site where you can type in all the interest rates and it does the maths for you!

Don't forget that rent will go up every year, and your mortgage will go down, so take that into consideration.

I think a wise step would be to get an EA to come round and do a valuation. Have a look on rightmove and see if there's any similar properties for sale in the area, and perhaps use same EA. Also look at the web pages that tell you how much properties in the area have sold for, as this will give you an idea of how much you can expect to get.

Perhaps also start a spreadsheet on Excel, and start writing down all your debts, interest rates, expenses (food, gas, elec, CT, petrol/public transport), and your incomings (salaries, benefits).

You may think you're useless with finanical stuff, but writing it all down will give you a much better understanding, and perhaps find a way around it without the hassle of moving.

Don't forget you need a good credit rating to rent, otherwise they might ask for 6 months rent in advance, or a guarentor. You'll have to pay for the credit checks too (about £100 per person).

teabelly

If you have a mortgage of 75k and a secured loan of 29k then that adds up to more than your house may fetch in this climate so I don't think selling is necessarily the answer. If you sold up you'd have to clear the secured loan so you'd need a minimum of 104k after all costs including EA fees, redemption penalties, solicitors and first rental deposit etc. Is this realistic? Check out sold prices and similar properties on rightmove.

If the mortgage is repayment then switch to interest only for a few years and get as much of the other debt paid off as possible. Pay whatever has the highest interest rate and pay the minimum on everything else. Are you on a variable rate or fixed rate mortgage? Before you default can you switch to a cheaper product? Watch out for the redemption penalties though as if you need to sell you could be caught out.

Post your SOA on the DFW board as I am sure they'll have some ideas on how to slash your outgoings and increase your income as I think you need to do both.

NikkiP_2

you also need to ensure that you can change your spending habits.
I assume that you have a secured loan because you have spent in excess of your income in the past and the secured loan tidied it up.
If you dont change your spending habits the same will happen again , except you wont have a house to bale you out.

You also need to consider the property market, while there will be a slowdown over a period of years the value of your property will rise. You will miss out on this if you sell.
I would suggest you get your house valued and look to remortgage to a higher loan to valu and split the mortgage on part repayment and part interest only.

If however you plan to move house at some stage anyway, then why not sell now, clear the debts and rent.( and change your spending habits)
When the property market falls further you will have the option to buy another property but at a lower price.

epends on what you think what will happen with house prices.

adr0ck

first thing to do noggin is work out the interest rates that you are paying on each of the different loans (including mortgage) and whether you will need to pay off any charges for paying them off quickly................and then looking to get rid of the loan with the biggest interest...........would remortgaging be better?

SquatNow

If you think house prices will drop, sell.

If you think house prices will rise/stagnate, remortgage.

SouthCoast

And more info here:


http://www.adviceguide.org.uk/index/life/debt.htm

sweetpeas_2

thank you all for your help. i think i need to go away and have a look at interest rates etc first and work out what would be of more benefit.

thank you all for replying, i need to go away and do some major sums first i think.

xx nog xx