To sell my house to sort out my credit score

[dinosandprincesses]

Ok so this probably sounds like I definitely am being unreasonable but please hear me out first.

We currently live I. A very small two bedroom house, DC share a room but this will soon become an issue as they are different genders and will want their own privacy etc. When we first had the DC we got in to a lot of financial difficulties due to my DH being laid off work unexpectedly and me being a SAHM (I was looking for work but due to childcare arrangements it was almost impossible). We ended up combining all the debts in to a DMP which has worked well for the past 4 years.

Now the issue is that we need a bigger house. We desperately want to pay off our debts but feel like we aren't even making a dent in it. With the DMP we have been told that it will affect our credit rating for 6 years. Which means we have roughly 18 months to pay it off before it then gets added for another 6 years. We have approx £14k in debt so paying it off in 18 months isn't an option.

The only way that we can see around this at the moment is to put the house on the market in 12 months time. We have approx £60k of equity in the house (possibly less if house prices keep dropping). The plan would be to sell the house, use £14k of the equity to clear the debts (it should be slightly less than this by then). We would then find a property to rent for 6/12 months whilst we built up our credit ratings again from scratch. We can just about afford to pay rental prices but would hope this would only be a temporary thing anyway. Then when our credit rating has improved we would apply for a new mortgage, which hopefully we would get approved on as we would have a pretty good deposit.

Does this sound like a fairly reasonable plan?

Don't know where you are in the country but I know in most parts of England and Scotland there are not enough rental properties so rents are really high.

So if you sell you will be struggling to find and stay in a rental property for over 6 months. Then years down the line when you want to buy again you won't be able to afford to.

I think you may struggle to rent with bad credit scores. And you don’t seem sure when the debt management plan will disappear from your records either. I’d do everything possible to stay put in the house you own, and move only once you’re certain that you have decent enough credit scores to do so easily. If the kids are young enough for you to do school hours, do they really need separate bedrooms so soon? You could also look at dividing the largest bedroom or you moving into the living on a sofa if it gets really critical. I really wouldn’t give up that security. And also remember the money you’re paying each month on the mortgage is increasing the equity you have. Pay rent instead and it’s just outgoing money, with no return.

Don't get off the housing ladder. Let the dc's have a bedroom each and you and your DH can have the living room.
Renting would be stepping out of the frying pan into the fire.

Yes lots do now.

Thanks for all the advice. I think you're all probably right that renting would be too risky when we are already on the property ladder. I just wish we had more options in terms of making our house a better lay out for the kids! We did once think of changing the upstairs bathroom to a very small single bedroom and putting in a shower in the downstairs bathroom but unfortunately that was ruled out as we don't have a window in the bathroom so it's apparently against the law to have it as a bedroom.

You’ll struggle to find a rental with a credit history like that.

Can you and your dh swap rooms with your dc op? Then put an IKEA Kallax unit down the middle to separate?

This is the best advice so far.

Dont sell the house. We did around 10 years ago now due to debt and have never managed to get back into the housing market. Renting isn’t easy either with credit issues and LL’s are selling up left right and centre only going to make it worse.

Stay on the housing ladder.. Your 60k will dwindle to nothing..60k - 14k - less selling costs - less rental (if you can find a landlord to accept you) less buying costs & stamp duty.

What is your house design? Can you consider a loft conversion?

I wouldn't sell your house to clear your debts and rent. Once your credit rating improves you will be able to remortgage and can look at buying something more suitable. Where I am a three bedroom flat with decent living area and a balcony would be a lot cheaper than a tiny two bed house (one double and single, though they have nice gardens). Like PP have said I would be looking to knock that debt down as quickly as possible if you have or come into any means to do so. How old are your DC?

If you sell your house you'll never buy again.

You need to draw up a proper spend summary and maximise opportunities to boost income.

You need to be patient.

You'll get much better knowledgeable advice on the MSE debt forum than on Mumsnet.

Sorry but your plan sounds awful to me because of the long term consequences.

I think there would be a very real danger that if you go into rented you can't get back to buying with a mortgage. It would probably take years to repair your credit rating to get an affordable mortgage and by then the term that you can take your mortgage over due to your ages might make it impossible.

Your rent will probably be higher than your mortgage (although you haven't said what your mortgage is or what you would expect to pay in rent). Your home would be insecure and the difficulty in finding new rentals could mean you need to move out of your area

I think you need to be creative about how you can get your existing house to work for you. E.g:
If there is a dining room turn it into a bedroom.
Split the biggest bedroom or the living room in two with a stud wall to create the extra bedroom you need.
Sofa bed in the living area.
If there is an integral garage convert it into a bedroom.
Try to come up with as many ideas as you can and hopefully you might find a solution.

If you decide that you are staying put at least in the short term you can put a bit of love into the home you have e.g. hopefully you can all have rooms that are small but perfectly formed.

Are you still a stay at home mum? Keep ploughing away at paying off your debts but if you don't work but are able to start now your kids are a little older you could pay off you debt quicker. Your credit rating being poor isn't such an issue if you aren't looking for a mortgage.

Sounds like a terrible plan. I would put the kids in the main bedroom with a divider wall (I’ve seen people use Kallax units from IKEA) and stay put. Ride it out so to speak. The rental market is dire at the moment and you could get thrown out at a moments notice. Or, would you and your husband consider getting a pull out sofa for the living room for yourselves if you’re adamant that the kids can’t share?

My friends did this. Three kids in a tiny 2 bed starter house and loads of debts ( for no obvious reasons apart from 3 kids ! ). They had a fold out bed sofa in the tiny lounge and lived like this for years so that the kids could have the 2 bedrooms. Not ideal but at least they have managed to keep the houses. I think they re-mortgaged, had consolidation loans. No idea how they got into such a pickle to be honest with 2 steady incomes always coming in, but twenty years later with 2 of the kids having moved out they do seem to be getting there and have their home !

@Winter2020 thank you that's helpful advice. I think we will be staying put and trying to work out how we can make the house work. My DC are currently 7 and 5 so are probably ok for a couple of years of sharing if needs be.

I'd also be looking at ways to maximise income. Work around each other. One of you taking a shift in a pub a couple of evenings a week or evening supermarket work. Anything that won't incur extra childcare costs. One of you could easily earn an extra £100 a week doing this to clear debts.

For those suggesting we use a Kaplan unit to separate the bedroom unfortunately this wouldn't work. Both bedrooms are the same size, they are a small double room. It's a new build (well it was when we bought it 8 years ago!) so there really isn't much scope to maximise space. I will try and do a little floor plan pic in a minute to see if anyone has any suggestions on how we could change it as sometimes you need a fresh pair of eyes on something lol.
Worst case scenario me and my DH could sleep on a sofa bed in the lounge but it wouldn't be a long term solution due to me having two slipped discs in my back, I need a really firm proper mattress to sleep in otherwise I don't cope with the pain at work.

Kalax not Kaplan! Doh

Don’t sell the house. It’s a terrible time to sell at the moment in most places, also you’ll use a good chunk of the equity renting (reducing your future deposit) and what happens if you still don’t get approved for a mortgage or the rate is extortionate? Can you split a room upstairs (doesn’t have to be insta-perfect) or buy a really good sofa bed so the kids can each have a room upstairs and you guys sleep downstairs (with storage space for clothes etc in one of the kids’ rooms)?

@Babyroobs I've been trying to find something but it would have to be online work as my DH is a HGV 'tramper' so is out most days/nights of the week with work and I'd end up having to pay for childcare when he's not here

I’d also agree with ruthless saving (no holidays, coffees, take aways etc) for a year to see if you can clear the debt and if possible taking a side job- even a couple of shifts at a supermarket could really make a difference? And lots of sofa beds have excellent mattresses these days.

I also have kids who are currently 11 and 10 opposite sexes who are happy to share- though there is a L shape so there is a degree of privacy. If you post the upstairs and downstairs floor plan sure someone will have some ideas too.

For reference for those saying about making our house work for us, this is roughly the layout of our house. The only difference is that our kitchen/living room isn't open plan so there is a wall between the kitchen and lounge/dining room. If anyone can think of a good way to change things around I would be very grateful!

Please do not ever remortgage and claim to the mortgage company it is for home improvements or whatever be honest if you are not and get found out it is called martgage fraud and you could well loose a lot more than a house and your credit rating

If they’re 7 and 5 you’ve got 3-4 years before the sharing becomes a big deal. You could try clever furniture arrangements in bed 1 as it’s symmetrical to give more privacy but I wouldn’t make any permanent changes to the house that risk devaluing it and instead I’d really focus on really improving your finances and make moving a 3 year goal.