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 🤣

Batshit crazy to consider this.

Have you considered if you have any Capital Gains Tax to pay if you sell the property?

The debts you have; are not all joint, so you will clear them, don't buy more stuff on the never never, no more sofas on loan, kitchens on credit... save for stuff and get it. You've hit your final straw moment; use it. Pay off these debts and live differently in future but keep the house. Rental properties are ridiculous.

2 bed properties near me can be £850 a month. Going up all the time because "thats the going rate" - vipers... all youre doing is paying for their property. You still have outgoings unless youre thinking of buying an RV outright and going nomad, you still need to pay to live, and it'll be more expensive.

This is all about the emotion isn't it? How it feels?
You've said you can't bare the feeling of having the debt hanging over you? You also feel like 'life is short' and there is a sense you want to enjoy life more?
Is the live for now feeling is part of what got you in this mess. You didn't need a new sofa (gumtree/eBay etc) and I'd be very surprised if you really needed new whatever the kitchen purchase was.
You should make your plans based on the long term. In the UK there is a disconnect between earnings and house prices. House price inflation has vastly outstripped wage inflation.Unless you are confident of both getting significant promotions in the next 10 years house price rises will outstrip any growth in income. Your remaining equity will pay for a tiny deposit, stamp duty and fees (if you manage to not spend it which I would highly doubt given your 'live for today' emotional pull), but your problem will be that you're unlikely to be able to borrow on your wages to match the inflation in property prices that will be inevitable in the next 10 years. It's not going to change because we have too much demand and a steady intergenerational transfer of wealth (due to inheritance for lots of people).
Renting sucks for families, you're deluded if you think it's a nice option. It's horrendously competitive to secure a place, rental prices are even more inflated and people are frequently made to move on. Why on Gods green earth you would put your young family through that to cut out two years of frugality is anyone guess
However it sounds like your emotional drive is overriding the cold hard maths and practicalities, so I wish you the best of luck and hope it works out.

Don't sell your home whatever you do .
Pay off the debt as you are now but you will never be able to get back the five years you have already paid .
It's a really stupid move and
anyone who tells you differently is wrong .
Good luck OP

Might it help to think of it this way; it sounds like you're only two years away from being debt free and having £1,000 a month additional disposable income. If you decide to sell now, realistically it is likely to be at least six months by the time you get everything sorted. That's six months of still paying the debt, stress of managing a house move with small children and so on. And by the time you're done you'll only have 18 months left on your debt. Honestly, I really know how stressful it is juggling debt but I think with such a clear end in sight it would be good if you can keep going. Others are right, the debt free wannabe boards on Money Saving Expert are so helpful and motivating. You've done so well not using your available credit and reducing your debt and in two years you'll be debt free with a huge amount of spare cash each month, a good credit rating and even more equity in your house. It really is worth it if you can.

It might also be worth asking your credit card providers to reduce your credit limit as you pay down the debt so you can't rebuild the debt. I have also been known to physically freeze my credit card in the past ie place in a tub of water in the freezer. Nowadays you'd also need to remove any saved card details from your phone / online accounts too. It just means you can't do spur of the moment spending but do still have the card in case of any absolutely necessary spend.

Good luck!

I’m not sure you would pass the credit checks to rent so that might be a huge issue. Plus selling costs, moving costs, deposit will add thousands of £ of unnecessary expenditure. Plus all of the upheaval and instability for your children and you. This needs to be a wake up call. Grit your teeth and tighten your belts and try to pay this off asap. Get an additional job if you can for a while. It’s tough but you’re young so it can be done.
Don't sell your home under any circumstances.

You seem to think renting will give you more freedom than owning but actually it would probably give you less, if your landlord decides to sell you might struggle to
find another rental that is affordable in the area you want in the timescale you need. Renting can be really unstable, especially as you have children with schools to consider.

Sorry OP, just coming back to say it's great you're using the snowball approach, that can be really motivating too. If you've got all your payments covered each month then each time you clear a specific account (eg sofa, kitchen, credit card) you can use the amount you were paying to that to pay for a treat the next month before then using that money to increase payments on the remaining debts in future months. Just to help you keep going with it and give you a few things to look forward to as you do. Just think of the amazing quality of life you will have with that £1,000 each month, and just at the right time for your kids ages.

Given the state of the rental market and the reportedly huge number of applicants for each property - what makes you think you'd even get a rental? You have 2 kids and your dh has a poor credit rating. Why would a LL pick you when other applicants would have no kids and/or better credit?

Do you know what the rental market is like in your preferred area? Have you shopped around and asked?

You say that you just want to be happy and you want to achieve it by selling your house. But what is making you unhappy isn’t your house, it’s your debt. Pay off your debt, don’t sell your house! You are already on the right track and you will be debt free in under 2 years. Do you know what might make you unhappy? The lack of a stable home for your children. Enrolling them in a school where they settle and make friends and then having to move them, potentially more than once, due to your rental situation changing. What will make you unhappy is losing a good chunk of your equity to selling fees, moving fees, solicitor fees and if you decide to buy again - stamp duty, solicitor fees, moving fees, paying more for a property than what it costs now. It is a really unwise move and it has nothing to do with what the government tells you to do. It’s all to do with being smart and making smart financial decisions for yourself and for your children. You are already making smart decisions by focusing on repaying your debt. Buckle down, swallow your unhappiness and in less than 2 years you will be not only happy but also secure.

We're hearing of a lot of private rentals in our area either having the price hiked up or the landlords selling up because of the costs of running them.

Which means a private rental isn't a particularly secure home. Having two children to house, that may not be the most sensible option.

I'd second speaking to StepChange (I work in finance and they are very highly regarded) and rethinking using your home to clear temporary debt.

Maybe look at changing jobs for higher salaries if money is becoming a proper issue?

Bonkers idea. You’ll be debt free in less than 2 years, which will fly by in no time. You’re also used to paying off the debt so in 4 years time you could have £20k in savings. I don’t see any logic in selling up. Rent will be way more than a mortgage payment. Not sure why you use ‘the government’ as a reason. You sound a bit like a rebel without a clue!

You sound a bit naive about renting - have you looked into what is available? Not just looked at listings but actually been in contact with agencies to get a lay of the land. I'm a renter and it's dire out there at the moment - we're in a housing crisis. In the area where I live there are hundreds of applicants for every rental listing! I live in fear of getting notice as I genuinely believe there is a high chance I'll be homeless if so (or living out of a hotel). Not because I can't afford to rent but because of availability - having a lump sum in the bank makes no difference.

Look up Maslows Hierarchy of Needs - shelter (physiological needs) is the base of the pyramid. If you have worries about secure housing it impacts your psychology in everything else you do. In terms of wellbeing it's 100% preferable to have a guaranteed roof over your head and debts, than vice versa. If you feel restricted by debt payments, wait until you don't know where you'll be living in a few months.

I used to have your approach of 'oh I'll just sort something out, as long as I have money set aside I've got options' and it worked for a long time, but my experience is that's not how the housing market works anymore (unfortunately).

Don't do it. Owning a house is your security. I wouldn't sell it to clear debt as you may never own again. Also, you say there is £80 equity, what about the fee to the estate agent for selling? Have you factored that in?

You might think you will keep the equity, but money can get spent so easily.

Plus house prices rise, rent rises, stamp duty... You could end up very stuck and struggle to own again.

The only thing I can suggest which may help to put your mind at rest, is to take out a consolidation loan for 20k. Pay off all the outstanding debts with it so it's only 1 payment a month. Maybe over 5 years so the repayment isn't as much as you're paying now but would mean you will be debt free in 5 years and can just think of the loan about as one thing rather than lots of different debts.

Or try and work at the smaller debts to clear them. Aim to pay off the smallest loan first by paying chucks of it, then work on the next smallest amount and so on.

Just don't sell ok! Your children are young and this is probably the most expensive time for you. Get through this and money problems will ease as they get older and are in school and you can increase your hours etc.

Hi everyone, I just wanted to say thank you SO much for all of your comments, I completely hear what you’re saying.
just a couple of things, the first property I owned was in a not so nice area and when we had our first child we wanted to move closer to family so we could only afford a house to renovate so that’s what we did with the previous equity. But there were some final things where money was running dry so we got a new kitchen (which was a need) that was 4k and a sofa for 1k. However my mindset now would be if I want something - we save for it, we don’t get it on credit.
my credit is actually good, however I run the risk of having too many things out in my name so it not deeming affordable due to my partners credit. Otherwise the consolidation loan would help me feel much better.
but, it’s a process and a learning curve, work hard to get the debt paid off over the next couple of years.

i do love our home, it is definitely just the debt.
also we couldn’t downsize as our house isn’t huge just a 3 bed semi and we have two children so it’s just the right size for us.
thank you everyone

As someone who will never have a mortgage I'd advise you to think long and hard about how difficult it is to never know if your house is secure. I'm almost 40 - I've been renting privately since I was 17 and have always paid my rent on time - I've been given notice to move out of my home 3 times - once when I was 32 weeks pregnant with a difficult pregnancy because they wanted to build another house in my garden, and once when I had a 1 year old child and 3 others - that was because I had the audacity to complain that the landlords daughter who lived opposite was letting her dogs poo in mh front garden.
I can't relax in my home, can't think about paying to repair the damaged patio because I don't know if I'll be asked to leave next month or not - and in my area if I am given notice I don't know if I'll even find a rental as the market has 100 applicants for every house.
Would I give up security of a roof over my head for immediate debt relief??? Absolutely no way in hell.

There is a middle ground - go to a broker who can also offer adverse credit mortgage. Yes, they’re slightly more expensive but it’s a far better option than your current idea. Release enough to clear your debts. Remortgage again once his poor credit improves.

Speak to bank your mortgage is with. They may be able to help you consolidate loans and chnage mortgage to interest only for a whilel

Crazy idea. No. Do not sell.

I haven't read the full thread so someone may have already mentioned this but... I am a Conveyancer. I cannot emphasise to you how much you will regret this. The majority of my Clients at the moment are landlords selling up, even landlords with just one property but also landlords with huge portfolios of properties (regardless of being stung on capital gains tax!) This is due to both the upcoming ratification of the Renters Rights Bill but also changes to EPC regulations and the five year anniversary of the Electrical Certificate rule. I live in a town that has gone from having 25 plus properties up for rent at any one time to none, and then when a property does come on the market the rent is astronomical. Don't do it. Just carry on pushing to pay the debt off. Sell what you can on Vinted, pick up any small extra jobs you can.

Edited to add if your husbands credit isn't the best you will be highly unlikey to be accepted for a private rental. Most letting agencies now use 'Goodlord' referencing and the rules are very stringent. Most applicants come back with a reference coming a guarantor will be needed. That guarantor cannot be self employed and must earn 3x the annual rent. Its a brutal process. The landlord of course has the final say but given the amound of people that are trying to get each rental someone in better circumstances will be picked over you.

No, would not sell the house,

You are managing the debt repayments. You don’t have good enough credit to get a joint mortgage, so unlikely to get a mortgage together moving forwards.
in 2yrs you will be debt free. You have a secure home, near supportive family.

How much is rental in same area for a 3 bed semi? If rent that for next 10 years, having spent the 60k equity then you will have no deposit and house prices will have risen making it even more unaffordable,

If rent, no security, have to deal with landlords and agencies and when older and wanting to reduce working how can you afford even higher rents? or would you look to rely on benefits to house you or want a council house? Is that likely.

you say w8 is young, yet you have chosen to have children at that age too so can’t have considered it too young.

@Chocice35

You say you love your house. As a long term renter who only recently managed to buy, let me tell you that you can LOVE where you live but the house not being yours is completely different.

Don't sell. You will wind up regretting it and with what you've said about your income and your partner's credit, you may never get back to where you are house wise.

The equity that's in your home is your future. Don't sell it for now when there's other things you can do. It often has to be tight when you're younger, don't make the mistake of living a life of luxury aged 28 and having nothing left when you're 78.

I wouldn't advise you to do this because private rents are high. I would stick with paying off your debts as you are doing. It's not about never being able to get back on the property ladder though.