Selling to pay off debt

[Chocice35]

Ok this may be a long one and controversial but here goes.
I am 28 with two children, I have had a mortgage for 5 years and a car etc. my partner and I have around 20k debt 12k which is on credit cards but on a 0% balance transfer. We are paying close to 1,000 a month on our debts. We are seriously considering selling our home using our equity of around 80k to pay off debt and start again.
now I’m not into the very traditional way of thinking, or following what the government want us to do which I have done until now, however I’m not sure if we necessarily will want to own our home again.
our plan would be to sell up and either move into private rented, yes slightly more expensive however we’d be sooo much better off as we wouldn’t have the debts to pay.
we would put a good chunk of money away, should we want to buy again in the future though.
I am unable to remortgage because it’s only me on the mortgage due to my credit being better and I’m on a reduced income to when I first got the mortgage so that isn’t an option.
tbh I think we are just wanting a change and a bit more freedom. Because we are still somewhat young then in the future we could buy again but buy jointly so that we could borrow more.
please don’t just say “you’ll never get on the property market again” as this isn’t helpful or factual. But I’m looking for tips from anyone who has actually done similar or in a similar situation.
or is everyone just in debt 🤣

You sound like you've made up your mind and have good reasons for what you're doing. You're 28, plenty of time to buy again. Go for it

If you are paying so much towards your debt, won’t you be debt free in a few years? Plus then only have 17 years left of your mortgage and more equity?
have you looked into the availability of private renting near you?

If your paying of 1k a month you will be debt free in less than 2 years. Seems a very drastic move when your not far of having a pretty high disposable income and a stable home.

What have you bought with the 12k that you could sell?

I’d be very reluctant to go into private rented in your situation OP.
can you extend the term off the mortgage to bring down monthly payments? At your age you should be able to have a 30 year term.

Look in to Stepchange debt charity, national debt line or pay plan and see what options you have

How did you accrue the debt? If it was from general day to day spending more than your income then the 60k of equity won't last long if you fall back into that pattern.

As some others have said you're better off squeezing your spends in the short term to reduce the debt and build up equity rather than risking the rental market and trying to get back on the ladder

Private renting is so unstable these days. You can pay off your debt in no time.

You’ll have it cleared in less than 2 years. Personally I would go hardcore at trying to clear it. I had significant credit card debt at one stage, I had my monthly repayment, but then I also did micropayments through the month to erode it more quickly. So if I budgeted £4 a day for a coffee and I didn’t spend it I would send that £4 immediately as a repayment on the card.

In that way, you might clear it in 20
months, but you might be able to clear it in 18. At that point you’ll have £1000 a month extra, which is really healthy.

If you can manage it, I’d have a frugal year and a half. By time you’ve got the house on the market, the sale through you could well be half way there.

It doesn't make sense, no.

Honest opinion - if you don't have the discipline to pay £20K down over 2-3 years, you probably don't have the discipline to keep the equity you'll have left over after clearing it. You'll be back in the same boat in a few years with no stable housing. If you were my friend I would encourage you to go through the few years of pain and cutting back to come out the other side debt free and with an asset for yourselves and your children.

No way, not when you will be debt free in 2 years

You have that debt paying less money than rent so you will run thr high risk of burning through that equity and ending yp the same place with nothing to show.

Appreciate some of that debt may have been from house maintenance etc.

It has to be worth having a real crack at the debt first. It sounds as if you are having a really good shot at it already.

DebtFreeWannabees on MSE have loads of advice to help

So the debt was initially accrued when I was made redundant and then fell pregnant so when I got a new job I wasn’t entitled to any maternity pay and was just the statutory. Some of the debt prior to that was my partner changing jobs and after I was made redundant my next role was hugely reduced in pay. We’re not overspenders but the money was paid to physically live and do what was needed. We haven’t used any credit in over 7 months now so I’m confident we wouldn’t fall into this pattern again - I’m sure of it!

@Twoshoesnewshoes im already on the longest term - ideal thing would have just been remortgaging but that isn’t an option.
i guess it still feels like a long few years when having debt looming over you, id rather be happy and being a homeowner isnt currently doing that. What good is the equity if we will never see it? Honestly I’ve learnt lately that life is too short and I’d rather do things while me and my family are young and healthy. I’m sure there could be regrets with a lot of things in life but I guess that’s where we learn, who knows!

Batshit idea. Plug away at your debts - you’ll have them paid off by the end of 2026 and you’ll still own a house. Please don’t start renting, I think you’d really regret it.

@EggnogNoggin nothing haha! It was for general living costs / bills etc. just builds up over time but I’m glad to be not using them anymore although I keep getting emails reminding me of my available credit !

I was in a similar position to you, much older, and drowning in debt. I understand that feeling of being ground down by the weight of it. But I held onto my flat, and in hindsight, thinking of selling was a mad idea. The cost of rent is obscene now.

Can you give it 6 mths/a year & then look at remortgaging then? You’ll have paid down the debt, got a good credit score from being on top of the payments & you might get a broker to find you somewhere that’ll let you add that debt to the mortgage & start over?

Lots are in this much debt. Keep plugging at it or apply for a loan each if it's easier. It isn't worth losing the security. Rentals keep asking you to move which costs thousands each time. You can't get them where you want them easily either.

You can contact your card provider and ask them to reduce your credit limit / stop the emails🙂

My friend's DD has had to move twice in private rented, once because the owner decided to sell and then at the next place the landlord increased the rent, well within their rights to do it. They couldn't afford the new rent and couldn't afford in the same area as all the rents were similar. They are now living 7 miles from where they were. Luckily they don't have a child in primary but now have to factor in a commute to work so have increased transport costs.

They also cannot decorate and make it their own, have to work to the landlord's schedule as to when things get fixed and are dreading the next rent hike. They could afford to buy but have no savings due to paying for a lavish wedding which they may well come to regret.

I would consider speaking to London and Country mortgages, they are free, whole of the market and see what the mortgage situation is for you now and whether there are products you could move to. Also do some number crunching to work out when you would be debt free in your current situation. You may find yourself priced out of buying in the future because house prices usually go up and up. The uncertainty of renting is why I would stay in your mortgaged house. Lots of people are in debt and work their way out of it.

Dont leave your home. You’ll be at the mercy of a landlord that can kick you out. You can’t put up pictures or decorate in some tenancies. Just keep paying it off. You can do this. If it feels daunting pull back very slightly on how much you’re spending on repayments. You’ve got a house. You’ll get through this. Dont give up.

I would think very carefully before doing this. Once you're off "the ladder", it's very hard to get back on again.

With that level of debt, you might find it difficult to get a place to rent. Lots of agencies run credit and affordability checks and if you've got debt that you're struggling to manage you might not find it easy to get a rental. And rents seem to be rising inexorably, although this may not be the case in all parts of the country (I'm in the SE).

Also, there's lots of talk about landlords getting out of buy-to-let because of changes in the law if the "Renters' Rights" bill goes through without significant amendment. If that's the case, rental property will become scarcer and probably more expensive.

Before taking such a drastic step, I'd be going through my spending with a fine-toothed comb, looking to ditch any non-essential commitments, and shopping around for better deals on everything that is essential. Then spend a couple of months living like paupers, not buying anything that isn't essential. No new clothes, no nights in the pub, no grabbing a £5 coffee on the way to work (if you do that daily, you'd save £100 a month), no holidays, no picking up a new lipstick because you fancy it etc. Then you'll see how little it's possible to live on, and how much more cash could be used to pay down the debt. And keep a track of where your money is going, and budget for things.

There's loads of good advice on Money Saving expert on this stuff, it's well worth exploring. Especially the stuff about budgeting.

I used to be shit with money, buying something new to wear for every party, lunchtime in the pub with colleagues etc. It took having maxed out cards and not enough to live on to give me a wake up call, and I got it under control. I won't pretend it was easy, but it was worth it. And although my main job is welfare rights, I also coach clients in how to manage their money. I've never gone through someone's spending and not found ways they can make significant savings.

Short term pain for long term gain. You would be mad to sell.

You say what good is equity if you won’t see it, but you will!

In 5 years time rent will have crept up with inflation, so will wages, and your mortgage will have decreased.

In 20’years time rents will still be taking a chunk of your salary, but if you stick with your house then your housing costs will be minimal.