Please talk to me about securing debt and getting out of this flat

[Debtarama]

Feeling a bit fed up about state of finances and debt.

Covid has made DP and I even more keen to move from the 2 bed flat we live in (and now both work in full time) but there is little equity in it and I have a lot of debt (long story and makes little difference to our situation).

I guess I have around £40k equity in the flat (not owned by DP). I also have around £30k debt.

Joint income is healthy but not healthy enough to wipe out debt quickly.

For various reasons we're just coming to a place where we can sort this out. I'm paying around £800/month of debt and DP is saving similar amount.

However we also need to pay for private IVF (no time to waste) and other high monthly costs (mortgage etc) are high.
In due course hopefully I'll take maternity leave...

I imagine we're unlikely to be able to get a new mortgage with my debt on a ten per cent deposit. (Looking at properties circa £400k)

What would you do?

Secure the debt on the flat to lower the monthly payments so I can save more?
The debt feels insurmountable.
We could let the flat and rent a house elsewhere?
We could save more doing that and perhaps in a few years DP could purchase his own property?

How would you unfuck this, wise MNetters.

@Debtarama, try posting on the Debt Free Wannabe forum on money saving expert. Lots of knowledgeable posters there in a similar situation as you.

Things are worse that I thought. Thought we'd have £40k equity but had the flat valued on Friday and it's likely the flat is actually worth a LOT less than I paid. In fact it's likely I'm in negative equity or at best if I sold would walk away with absolutely fucking nothing

I'd recommend getting your flat valued by several agents. We had a huge range on our house! The market is pretty good right now so I'd expect prices to be reasonably high though obviously without knowing area/style/cost it's hard to say for sure. But I'd definitely get a second opinion if the valuation is that far off what you expected.

"We could let the flat and rent a house elsewhere?
We could save more doing that and perhaps in a few years DP could purchase his own property"

Why could you save more renting out your flat and renting a house elsewhere? Would the flat rent out for a lot more than you would pay for a house? Could you manage for a while if your tenant didn't pay? If you are a higher rate tax payer or the receipt of rent (before deductions I believe) makes you a higher rate tax payer then mortgage interest is no longer fully deductable as an expense. This results in you having more tax to pay and you may still have tax to pay even if you make a loss. Crunch the numbers carefully.

It would be best if you could hunker down and pay off everything you can/save up and then (at the £800 each rate) you will have your 40k deposit in about 4 years.

You mention you also want to pay for IVF. Is it necessary to pay 400k for a house? Is that a modest house where you live or a 4 bed detached?

Also if you have 40k deposit and 400k house you will need 360k mortgage. Your joint income will need to be about 90k to get that mortgage.

It's very unlikely that you could secure debt on the flat when there is little equity in the flat.

10% deposits aren’t available any more, afraid to say. They were withdrawn in March. A tiny amount of lenders are doing them now (really tiny) but your credit history would need to be sparkling. The standard LTV now is 85%.

We stuck all our (childcare) debt on interest free cards. Not sure where yours is but if you are certain you can pay it off in the time they are a great option.

Also be aware of possibly needing a buy to let mortgage if renting, which is only usually available if you have a lower LTV

If you are really adamant on moving then it fees like your best bet would be to rent a house and find tenants for your flat. I would make sure you have 6 months mortgage payments set aside to cover unpaid rent from your tenants if things go wrong or gaps between tenancies.
Building societies are Expecting deposits bigger than 10% now and if you have no equity in your flat then it’s worth holding onto it in the hope that prices will rise again. And this way you will keep a foot on the property ladder.
Prices always rise eventually, it’s just sometimes they rise quickly and sometimes they go backwards for a short time.