Need some advice - SOA - Selling home to pay off debt?
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Starman1986 wrote: »Everyone has said don't sell the house, why? Why would I want a mortgage debt for the next 30 years of my life? It's the largest debt and therefore more risk to my family?
For me this is a no-brainer. As long as you can keep up with the mortgage, no-one can tell you to move, so it is more secure option than renting. Maybe you could look into downsizing and getting a smaller mortgage as a result?0 -
Thanks pennystretcher
-Our mobiles go through the business
-We're not particularly motivated to move back into the house so don't see much incentive to keep it - my question was more around why everyone is telling us to keep hold of our biggest debt? It's a financial millstone0 -
Starman1986 wrote: »
Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2750
Partners monthly income after tax....... 1750
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4500
Monthly Expense Details
Mortgage................................ 1063
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 150 spread over 12 months instead to bring it down a bit
Electricity............................. 100combines with gas this is incredibly high, more than double what would be expected for a three person family. Change tariffs/supplier and be more careful with use
Gas..................................... 100
Oil..................................... 0
Water rates............................. 50 seems high, if on a metre cut back, if not consider getting one
Telephone (land line)................... 0
Mobile phone............................ 0
TV Licence.............................. 12
Satellite/Cable TV...................... 40 Is this really needed?
Internet Services....................... 20
Groceries etc. ......................... 400 this could easily be halved for 2 adults and a toddler. Head over to the old style board to find ways of saving
Clothing................................ 100 do you really need £1200 of new clothes a year? Stick with what you have for now, sell anything you no longer want/need and join some swap shop groups for clothes for the little one
Petrol/diesel........................... 200
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 100
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 20
Buildings insurance..................... 0 as mentioned you need this and content insurance
Contents insurance...................... 0
Life assurance ......................... 50 this seems quite high considering the house value
Other insurance......................... 0
Presents (birthday, christmas etc)...... 150 do you really need to spend this amount on presents?
Haircuts................................ 10
Entertainment........................... 100 look for fun free things to do in your area, go for a picnic, go for long walks etc.
Holiday................................. 0
Emergency fund.......................... 0 you need something here
Car lease............................... 230
gym..................................... 17 could you take up running instead at least for now?
overdraft charges....................... 30
Total monthly expenses.................. 2942
Assets[/b]
Cash.................................... 0
House value (Gross)..................... 270000
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 270500
Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 242000...(1063).....0
Total secured & HP debts...... 242000....
Unsecured Debts
Description....................Debt......Monthly...APR
Ex-employer loan...............11500.....500.......8.25 (£8.5k final bubble payment due Nov 2018)
Credit Card....................1900......80........18 (pay 150 per month)
Loan...........................30000.....700.......7 (3.5 years remaining)
Total unsecured debts..........43400.....1280......
Monthly Budget Summary
Total monthly income.................... 4,500
Expenses (including HP & secured debts). 2,942
Available for debt repayments........... 1,558
Monthly Unsecured debt repayments....... 1,280
Amount left after debt repayments....... 278
Personal Balance Sheet Summary
Total assets (things you own)........... 270,500
Total HP & Secured debt................. -242,000
Total Unsecured debt.................... -43,400
Net Assets.............................. -14,900
Looks so bad but trying my best to get better
If you are living with your partners parents how are your expenses for your own home so high? Shouldn't everything just be on daily standing charges?
You are earning more than enough to service all of your debts and be able to save a bit even before cutting back, if you cut back you could easily have an extra £400+ a month left over. If you are not finding that you have the £278 a month left over (which I assume you don't with no emergency fund nor cash savings) then you really need to keep a spending diary to find out where it is all going. You are "missing" over £3000 a year. Keep a log of every penny, that includes the bar of chocolate you buy when getting fuel, and the cup of coffee when out and about, and the meal deals for lunch, it all adds up surprising quickly and it can be an eye opener seeing exactly what goes where.
I see no real reason to sell the house, you could be debt free (not including mortgage) in 6 years while still leading a comfortable lifestyle and having some luxuries, even a holiday or two and then start over paying the mortgage to get your 30 year term down to 10 years where you could then live mortgage and debt free.0 -
Two things strike me, one is the close link between business and personal finances. You seem to be paying yourselves what you need, rather than what the business can afford. I think that you, as business owners, should take a harder look at the employment practice and what it can really afford. This will probably make your lives as employees harder for a bit.
At present you are more than breaking even, and that is without the air b&b income you mention and there are a lot of good suggestions for further restricting your spending.
On keeping the house, you need somewhere to live. Buying and selling houses is expensive with all the fees and taxes. If you keep stretching yourselves to pay this every month you will eventually have a secure home and sizeable asset. In a way it is an enforced savings plan.But a banker, engaged at enormous expense,Had the whole of their cash in his care.
Lewis Carroll0 -
If you make enough money on AirBnB etc to cover the mortgage, keep it going. However, you have to let your lender know that this is what you are doing. If you are not living in it despite mortgage agreement, they are likely to force immediate payment of the house on basis of breaking the agreement. And also if there is damage done to the place during short term lets, your insurance might not cover it unless you have told them about a) not living in it b) letting it out on short term.
Also selling the place - be aware of the CGT if you haven't lived in the property for a while...0 -
Starman1986 wrote: »Thanks for the comments!
- On the mortgage, as the new business has only been incorporated 18 months and salary has fluctuated I think we'll struggle to get a better deal, is this correct? Not even sure what happens when we get to December, assume it just automatically increases? Am I able to just switch?
- Overdraft is just used for living and struggle to escape it at all. Will look at billing dates
- On consolidation, I understand the need to address each debt but it's actually having a detrimental effect on the business having to take so much money out of it each month, i.e. slowing growth and overall output which leads to a longer journey out of debt. The consolidation would be used to ease the pressure on personal cash flow and make sure the company stays solvent or else we have zero income. Plus, I can't shift the ex-employer debt to a 0% credit card. I could probably balance transfer the 2k credit card to another?
Everyone has said don't sell the house, why? Why would I want a mortgage debt for the next 30 years of my life? It's the largest debt and therefore more risk to my family?
You seem to be choosing which questions to answer and ignoring a lot which doesn't enable people to help you properly. Only you understand your full situation whereas people need to ask questions to understand your position and thought process.
If you take no action with your mortgage it will just revert to the standard APR at the relevant date and your mortgage will increase. Lenders normally contact you a couple of months before with the options they have for you. You can switch at any point unless you are on a fixed term. Then you can switch but there is usually a fee associated with doing so or you look to switch as your fixed term draws to an end.
So you are withdrawing the money from the business that you need to service your lifestyle and debt rather than what the business can afford? This is something you need to address if so and it sounds like you need some business/accountancy advice if this is what is happening.
Why don't you look at money transfer 0% credit cards?
Having your own home provides your young family with security. You're living with parents - do you envisage staying there forever? If you move to rented you're throwing your money on the fire - what have you got to show for paying your rent every month? How much are you intending to spend on rent? If you repay a mortgage then you are a step closer to owning the home every month. You might have an unpleasant landlord as a renter. Repairs might not get done to the property in a reasonable timeframe. You might have to move out if the landlord decides to sell.
Will your partner's income increase when she returns to work (presume she's on maternity leave) or will it remain the same? Is the business reclaiming the SMP element? What are your intentions regarding childcare as that's not cheap (unless you have willing family - my brother has saved a fortune by doing this over the years but, unfortunately, we don't live close to parents!!)0 -
The £1750 income you put down for your partner - is she actually receiving this each month, given that you said she is on maternity leave?
How much will the added childcare costs be vs your partners salary when she returns to work?
How long do you anticipate staying with your in-laws and are they ok with this?
Assuming you sold the house, how much money do you anticipate saving for the new house deposit and how long do you think it would take to save?I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com0 -
You intend to sell your 270k home with a little bit of equity to pay off 40K???
Don't sell your home, chances are you'll not get another. Tighten your belt, get ready for some blues to descend, grit your teeth and get on with paying it back!0 -
andydownes123 wrote: »You intend to sell your 270k home with a little bit of equity to pay off 40K???
Don't sell your home, chances are you'll not get another. Tighten your belt, get ready for some blues to descend, grit your teeth and get on with paying it back!
A good point; there's "only" £28k equity in the house and that's presuming it is on the market at £270k and sells at that price rather than a lower offer. There's also estate agent and solicitors fees to subtract from that amount. So I presume they would clear whatever debt they could, stay with in-laws paying nominal board until the rest of the debt was cleared then move into rented?
They might be as well staying with in-laws, renting the house out for a year or two to cover the mortgage payments (or as close as they could get) and chuck the money they would have paid for the mortgage at the debt. At least then they stay on the property ladder. They'd just need to sort out a different mortgage with their lender if that were an option.0
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