Sell up to pay off debts?

tayepe

Hi everyone!!

This is my first ever post and am just looking for some advise. After years of living beyond my means I've now found myself in around £21k of debt (loans & credit cards, not including student loan or mortgage). I've decided its time to grow up and sort this out but my dilemer is whether I should sell my flat or not.

I live and in London and my income is around £2150 a month. I grew up in Cornwall and on a whim I purchased a flat down there a couple of years ago from my parents nieghbour. I bought it as London prices were far too high and there was no way I could afford anything at the time, so it was kinda as an investment. I bought the flat using a 100% mortgage for £91k and spent some money doing it up, its now worth £115k (though in the current market I doubt I'll get that). My mortgage repayments are around £630 a month though my rental income is only £525, this is because my fixed term has recently ended.

In london I rent so when there's no one in my flat (as there is now) I'm having to pay both rent and mortage which is ok for a month or so but any longer then I'll have to borrow money to live.

What do you think I should do? Should I sell the flat and pay off my debts or do I kept it as its best to own something and there's a possibility I might move back down to Cornwall one day.

Please advise as I'm so so so confused about what to do?

Thanks

Tracy

ltm07

Hi,this is a tough one! Usually i would say don't sell because as you say it is an investment & you don't want to come off the propert ladder & be paying rent for the rest of your life. If you put your SOA on here then i'm sure some fine people on here will be able to help you make cutbacks where possible. It is worth looking at Martin's remortgage guide which may help you find a cheaper mortgage. We did & it cut our mortgage down by £50 a month. Good luck.

Mrs_Sparkle

You could always put the flat on the market and see if any attractive offers come in. If it's any consolation, house prices are likely to stay pretty flat for the next few years so if you pay off your debt with the proceeds then start saving hard you may be in a position to buy again in the short term.

ltm07

Mrs_Sparkle wrote: »

You could always put the flat on the market and see if any attractive offers come in. If it's any consolation, house prices are likely to stay pretty flat for the next few years so if you pay off your debt with the proceeds then start saving hard you may be in a position to buy again in the short term.

You do earn a very good wage but to get back on the property ladder would still be a hug mountain to climb,especially if you were to buy in London or Cornwall. Even if you could save a 10% deposit for a house,you would still have a huge mortgage. Put all your debts & APR's into www.whatsthecost.com which will prioritise which debts need tackling first, do a CC shuffle,to get your debts onto low LOB & 0% CC's & stick around for the great advice that people on he gie yo. Good luck.

tayepe

Thanks!! Yeah I know its a tough one, I really like owning my own place even though I don't live there.

I've taken your advise and put together a SOA (see below). I'll probably get lots of people telling me off for over spending as I know there's a few places I could cut back, like food. Problems is I like my life and old habits die hard. Good thing is I've really cut back on clothes spending, I use to spend hundreds a months whereas now I haven't even been into a clothes shop since December. :T Its shows that eveythings cool until my flat's empty and then I'm £525 down on income which causes me to spent more than I earn.

Any help or advise on how to cut my debts and whether to sell up is greatly appreciated.

Statement of Affairs and Personal Balance Sheet

Monthly Budget Summary
Total monthly income.................... 2692
Expenses (including secure debts)....... 2193.5
Available for debt repayments........... 498.5
Monthly UNsecured debt repayments....... 463.75
Surplus(deficit if negative)............ 34.75

Personal Balance Sheet Summary
Total assets (things you own)........... 115000
(Assets less secured debt).............. 24000
Total liabilities(what you owe)......... 112013.19
Personal net worth...................... 2986.81

Monthly Income Details
Monthly income after tax................ 2167
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 525
Total monthly income.................... 2692

Monthly Expense Details
Mortgage................................ 630
Secure loan repayments.................. 0
Rent.................................... 471
Management charge (leasehold flat)...... 20
Council tax............................. 45
Electricity............................. 9
Gas..................................... 10
Oil..................................... 0
Water rates............................. 5.5
Telephone (land line)................... 5
Mobile phone............................ 35
TV Licence.............................. 3
Satellite/Cable TV...................... 0
Internet Services....................... 5
Groceries etc. ......................... 150
Clothing................................ 100
Haircuts................................ 50
Entertainment........................... 150
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 93
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 17
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 25
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Holiday................................. 0
Emergency fund.......................... 0
Random.................................. 50
Mags & Papers........................... 20
Eating Out & Take Aways................. 100
Toiletries.............................. 50
Lunch & Snacks.......................... 100
Total monthly expenses.................. 2193.5

Secure Debts
Description....................Debt......Monthly...APR
Mortgage...................... 91000....(630)......N/A
Total secured debts........... 91000.....N/A.......N/A

Unsecured Debts
Description....................Debt......Monthly...APR
Tesco Loan.....................6300......165.......5.9
Egg Credit Card................3911.94...78.23.....16.9
Barclaycard....................3967.25...89.25.....14.9
HSBC Overdraft.................1000......0.........18.8
Abbey Credit Card..............3772......84.87.....15.9
Natwest Credit Card............2062......46.4......12.9


Also note all my credit card debts are now currently a 0% apr until early next year.

Thanks!!

Persolv0

tayepe wrote: »

Hi everyone!!

This is my first ever post and am just looking for some advise. After years of living beyond my means I've now found myself in around £21k of debt (loans & credit cards, not including student loan or mortgage). I've decided its time to grow up and sort this out but my dilemer is whether I should sell my flat or not.

I live and in London and my income is around £2150 a month. I grew up in Cornwall and on a whim I purchased a flat down there a couple of years ago from my parents nieghbour. I bought it as London prices were far too high and there was no way I could afford anything at the time, so it was kinda as an investment. I bought the flat using a 100% mortgage for £91k and spent some money doing it up, its now worth £115k (though in the current market I doubt I'll get that). My mortgage repayments are around £630 a month though my rental income is only £525, this is because my fixed term has recently ended.

In london I rent so when there's no one in my flat (as there is now) I'm having to pay both rent and mortage which is ok for a month or so but any longer then I'll have to borrow money to live.

What do you think I should do? Should I sell the flat and pay off my debts or do I kept it as its best to own something and there's a possibility I might move back down to Cornwall one day.

Please advise as I'm so so so confused about what to do?

Thanks

Tracy

Hello Tracy
I think your decision is based on a couple of factors

1)your age.......getting on the property ladder is tough these days ...if you sell do you feel your young enough(I ve no idea of your age just a point of view to examine) that once debts are paid off can you save for a decent downpayment on a new place without debt hanging round your neck next time round?

2)Whats going to happen to the property market??alot of doom and gloom just now on house price stagnation etc but on the other hand if property prices take off again will you ll lose out?

3)Your saying that the house is empty just now....is it likely to remain empty for long or is it reasonable to assume that getting a tennant will be easy enough to remove the mortgage burden from your I and E and let you focus on getting rid of the debts?

4)Your in a good place just now in the sense that you have choices ... releasing the equity through sellng and clearing a large chunk of your debts or holding out and attacking your debts as one issue and getting a tennant in place ASAP as another issue ....what is the short,medium and long term benefits to quality in life of keeping or dispopsing of the property in your mind?

Sorry I cant give you a yes or no answer but thought id throw in some questions for you to mull over and hopefully help you decide ....

personally if it was Me?...quality of life outweighs finances...id sell up to help clear debts then clear remaining debt in the hope of re entering the property market at a later date either in cornwall or the freedom to look elsewhere..(and give uncontrolled debt a wide berth in future)

good luck whatever you decide:beer: