which life?

callymac

Thanks for all your helpful suggestions so far re our debts. Just to put you in the picture my husband is a fit and semi retired 70 yrs and I am 50yrs and working. We have two teenagers under 18yrs. As far as I can see with the extent of our debts (see previous post!)we have these options:
take out a DMP which will last for 10 yrs and forego any hols, leisure, etc.

change to an interest only mortgage for the foreseeable future - probably until the end of the mortgage term and then have to sell up to pay mortgage.

or sell the house, clear all debts leaving us around £100 thousand to invest and rent a property.

I am going crazy trying to decide our best course of action. Can anyone give us the benefit of their expertise, please?

Thanks Callymac

lynnexxxo

My thought (for what they are worth)

Option 1 - in ten years you kids are likely to have grown and flown the nest - yes you will have paid your debts but you will have missed out on memories with them. Also in ten years your husband will be 80 - you may be debt free but will his health still be good enough to enjoy it?

Option 2 - interest only - ok you will have to sell the house at the end of the term but you would get the benefit of staying put and still being able to afford to enjoy yourself - and as you have ~100k in equity now probably in ten years you'll still have a good bit of equity, meaming yoou could afford to rent them.

Option 3 - you'd have the cash - you could move you where you want and would have readies to help your kids through university or whatever. However if you are spending the money on this that and the other it will soon dwindle.

clutton_2

i would go for option 2

pinkshoes

It depends on how much the house is worth, how much the debts are, and how much mortgage is remaining.

If you went with option 2 - change to an interest only mortgage, pay off all your debts, then at the end of the mortgage (when the kids will have no doubt left home), would you be able to sell your house and buy something smaller with the equity left?

fc123

number 2. Good luck with the decision

Nenen

I'm a similar age to you although my dh is younger than I am. We sold our house last year (job move to a much more expensive area) and are currently renting while we wait to see if prices will fall so that we can afford to buy something reasonable without have to have an interest free mortgage until we retire (like your option 2).

It's a gamble (on house prices going down significantly in the next couple of years) but I would look seriously at option 3 and weigh the pros and cons very carefully. Depending upon where you live, you will probably be able to rent somewhere cheaper than you pay in mortgage. If you invest your 100K you will also be earning interest on that too. You could use this extra money to help pay off your debts while keeping your lump sum collateral safe, ready to buy again as and when you can afford to do so.

callymac

Thanks for your helpful advice. I am torn between renting and going interest only on mortgage. This area is v. exp. to rent - £800 - £1000 p.m. at least so I have to be sure we don't eat into the £100K or there is nowhere left to go!

callymac

Thanks for your reply. At the end of the term we would have maybe £100K left so not enough to buy but we could rent.

pinkshoes

callymac wrote: »

Thanks for your reply. At the end of the term we would have maybe £100K left so not enough to buy but we could rent.

£100k would allow you to rent for 10 years at £800 a month after you retire. How would you pay the rent after this? Perhaps you could retire to a cheaper area!!

Do you have a private pension, as the state one wouldn't cover that sort of rent!?

Generali

pinkshoes wrote: »

£100k would allow you to rent for 10 years at £800 a month after you retire. How would you pay the rent after this? Perhaps you could retire to a cheaper area!!

Do you have a private pension, as the state one wouldn't cover that sort of rent!?

That assumes that the OP wouldn't earn any interest on the money though.

If we assume a net return of 3% on the money and rent increasing at 3% pa the money will last 15 years. Also, the OP has a mortgage so isn't going from nil housing cost to £800.

Having said that, OP is also spending more than income, often a route to disaster.

merlinthehappypig

I'd go with 3, having done it, but with a major proviso:

Whatever you decide you need to alter your spending patterns.

You don't go into any detail about your debts and how they have arisen but, in the absence of any other evidence, I'd assume with the normal method, which is spending too much. This has to stop. Selling your house and having a lump sum is great, but only if you can be disciplined. Otherwise it will all be gone in a few years.

As Generali says, that money could last you a long time (I'd got it at 12 years, but we all work things out differently!) That's paying the rent solely from the interest. If you make a contribution from the money you are already paying on other debts such as loans, credit cards and mortgage it will last you a lot longer.

Alternatively you could buy a smaller house with a smaller mortgage, but the same need to be disciplined applies.

We have been renting a year now and have more capital than when we started so it can be done.