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 🤣

Can you put your partner on the mortgage now ?
can you work a few more hours?

I wouldn't sell to pay off debt. You'd go into unstable private rental and you'd have to pay stamp duty when you buy next which could be 5k depending on where you live and what it costs there.

You are paying down quickly so I'd stick with that
or
You can do a product change and roll the debt into the mortgage

I had a lot of IVF debt and am rolling it into the mortgage. I'd rather not do this but I want the breathing room and the 3% to roll the debt every 6m to 1y adds up to more than what it costs to put it on the mortgage.

No no no, this is crazy. Your debt is on 0% interest, and you're paying off £1K per month of a £20K interest-free debt. That's GREAT.

What's not great is selling your house and entering the unstable private rental market right now, which you'd even struggle to enter due to the demand for properties and your husband's poor credit. It's highly likely private rent would be way more than your current mortgage payment too.

Just think, in less than 2 years time you'll have paid off this interest-free debt, and then can make overpayments on your mortgage and be mortgage-free sooner than expected! Then you'll own your own home outright and not have the worry about how to afford private rent when you're old and retired or unexpected illness stops one of you from working to retirement age!

Please don't do this, you're panicking unnecessarily over an interest-free debt that you're already doing really well with paying off.

You will regret selling so much further down the line. Honestly, don’t do it.

What is the 8k that isn't on credit cards? 1k per month repayments seems unnecessarily high. If you could get the 20k on 0% credit cards that had a 1% min repayment per month (some seem to have 2 or 2.5% min) that would he £200 per month, which would give you more wiggle room and flexibility to manage your debt.

I know some people prefer renting but in the long term it is just throwing away money. Over time a mortgage as a proportion of your income goes down but rent will always go up.

Some lenders offer mortgage payment holidays. If yours does, it could give you the opportunity to clear your credit card debt more quickly

@notatinydancer his credit still isn’t the best so I’m not sure it would benefit us?
I do 30 hours a week with a 1 year old and 3 year old so I feel like I’m already doing enough between juggling home life. My partner is already working ridiculous hours though

But it would take far longer to pay off and the OP wants it gone asap, problem with minimum payments is you get used to just that and it takes forever to pay off as mainly just covering interest and so the balance spirals

@Promo981 so 6k is left on a loan £257 per month which will be paid off in 2 years. There’s a kitchen payment of £90 per month so just over 1k left on that and then we have a few smaller payments I.e sofa. So the 1k is the total including loan, credit card minimum payments and then an extra payment of £300 to a credit card using the snowball affect. Which we have started doing recently

Speak to step change.

It might not be fun but getting the debt down and keeping the house is a far better option

You need to do a credit check to rent a house so your dp might be turned down for a rental home. Keep your home, change to higher paid jobs and pay off your debts.

2 years? That's nothing. So your options are:

1. Sell up, move into rented, pay off your loan, be at the mercy of landlords, not end up with your own mortgage free home eventually

1. Grit your teeth for 2 years, keep your home, you could even overpay the mortgage a bit once you stop paying the date but you will have £1000 a month you are no longer paying off your debt with and still have equity in your own home.

@Chocice35 crazy idea

Why did you even think of it?

Don't do it.

That's really positive as the fact you are not getting in to more debt with your income is really key. As others have said, you are incredibly near to dealing with this and then you can have more disposable income and pay down your mortgage. (And more fun, it is boring being broke)

Private renting is precarious, you have done brilliantly to be where you are with your own place, hang on to that security. I don't think you will have any regrets

Think of it like this. You sell the house to pay off your £20k and have £60k in the bank. You lost some of the equity in the sales fees. You might need to move a fews times in private rented and pay fees/deposits etc so over 5 years you’re down to £50k. Maybe you earn some interest so maybe a little more than this.

Meanwhile imagine you sell your house for £200k in 2025 and it’s a 3 bed semi. You had £80k equity so £120k mortgage. You pay rent to a LL for 5 years so don’t progress on the property ladder. In 5 years time you want to use your £50k to put down a deposit on a new 3 bed semi. You have to pay stamp duty and all the legal fees of purchase again so about £40k deposit. The 3 bed semi now costs £230k so you need £190k mortgage rather than £120k and you’re now 5 years older so the bank only offer you 25 year term instead of 30. Your monthly payments could be much much higher than currently, even factoring in the debt repayments and you end up paying £30k more for a similar house. I would imagine your plan whilst sounding appealing will cost you much more in the long run!

Fair enough. Might be worth talking to a broker ? London and Country are good.

Get financial advice. For here Id say to keep your home and both of you take second jobs if overtime isn’t possible. If you don’t work at the weekend you could get a second job. Do this until the debt is paid off.

can you down size or move to a cheaper area. I was a single parent with 10k of debt and I moved house, downsized, paid off my debt and gave myself a few thousand pounds to put away for a rainy day. Best thing I ever did. I wouldn’t rent unless I had no other choice.

I get that you don't like doing what the government tells you, but I think that selling your home would put you at the mercy of the government far more than owning your own place. Every mortgage payment goes towards getting freedom from the outside world, the patterns of financial fluctuations affecting interest rates etc. If you go back into renting, you're going to be far more effected by governments/financial ups and downs for a longer time.
I totally get the feeling of hating being in debt, but just stick with it, it will be gone in no time, honestly. Then when it's gone, you can put that amount into overpaying your mortgage, and maybe think about getting even more self sufficient, creating your own energy etc. Play the long game here!

God looking at the advice on here has filled me with panic.

We went the other way. My husband had amassed nearly 30k worth of debt. He was taking less and less lucrative job roles, could rarely stay in one place long enough, and we ended up in a scenario where we could barely make minimum repayments.

We sold and have used the equity to pay off the debts and move into rented the other end of the country. We have a deposit, fees and a small chunk more to put towards our next house purchase. Although by the sounds of this thread, we’ll never be able to buy again!

You’re able to pay off substantially more of your debt than we were. If we could pay 1k a month off our debt then I wouldn’t sell, I’d keep at it.

@Chocice35 you also need to check
out the rental side of things, apparently if you private rent you are now likely to need a guarantor and if both of your credit ratings aren’t the best that seems even more likely.

You are risking the secure home your young children have now to pay off debts and have some savings. How long before you are moving from rental to rental due to instability in the rental market or increased rents? Moving the children's schools, GPs, making new friends etc as you may have to move to rentals out of your area.

You seem to be prepared to risk a lot for short term gain as you pay off your debts. How long before you start spending some of your savings?
Did you really need a new sofa on credit when there are excellent bargains, second hand for a fraction of the cost? Have you factored in estate agents fees, solicitors and moving costs which will take some of the £80k profit that is if your house sells for your asking price?

As others have advised talk to one of the debt management agencies who can and will help before you risk the stability which is within your grasp.

They don't even need second jobs. They are paying a good chunk off as they are and will be debt free in 2 years if they don't sell the house.

Sadly despite all the good advice on here OP seems bizarrely excited about selling up and becoming a renter!

Friends of ours did that, around 25 years ago. Never got on the property ladder again. Both in 50s now and looking at poverty in retirement still having to pay private rent. Were sure they council would eventually house them but didn't happen.

I would keep my home, rented is expensive long term & not stable. I've had so many friends who have been good tenant's have to move far away from their kid's school etc when landlords sell up. Speak to step for change debt charity & get some advice. Did deep & focus on clearing that debt & you will feel much more positive with a plan. Still budget for some fun & day's out, just accept it'll take a little longer to clear the debt. Good luck x