bad financial situation, sell house?

[blackmonday]

I love my home so much but we are in a real financial mess. We are over £35k in debt. We have most of our debt with payplan on a dmp but still owe about £3k on top of that. dh is self employed and not bringing in enough. We have no access to any credit so are getting to the stage where we are down to our last penny and household bills are not getting paid. We have never missed a payment on our mortgage and in todays market probably have about £35k equity in our property. I know most of our creditors would take offers on what we owe and we could probably clear all our debt for about £20k. But then the kids would lose their home, we would never get a mortgage in the future and would have to rent for a long long time if not forever. We are approaching 40 so not that young anymore. Would you sell and go into rented to clear the debt or would you hang on hoping things improve?? I am looking round for things to sell on ebay at the moment to pay my gas and electric dd. that's how bad things have got

just picking up on what millymollymoo has said...i have to say that the benefits system most likely WILL NOT pay that amount unless both parties (OP and her DP/DH) are on benefits. they would be entitled to exactly nowt i found this out myself. i work full time at a low wage rate(£6 per hour), DH out of work for more than 3 months, benefits said basically sorry you work so we cant help that is for ALL KIND of benefit other than job seekers we were in such a position that we had to ask for help from our mortgage company-who honestly have done ALOT to help us with regards to this but i say if the situation is such that benefits are in the pipeline, DONT rely on the fact that they will pay the mortgage/rent as chances are they will weasle out of it like they did with us

noddy her DH is self employed and not earning enough, so he will either earn more in the future or find a different source of income ie a PAYE job or else they will eventually go bankrupt, but even in that worse case scenerio they get to keep their home in plenty of cases and have all the debt written off, if they still had to leave their home we're still talking 18 months to 2 years of stability in the children's lives.
There really is no need to go throwing themselves to the wolves for the sake of £35k.

PandaEis, you need to sit down and work out if your job is worth more than the potential mortgage payments, it may be if your DH doesn't get a job straight away you are better off unemployed too.

millymollymoo thing is though, giving up work myself would solve nothing! i work because i enjoy it and regardless of the fact that my wages are low, i really dont think that putting myself and DH in the position where we are entirely reliant on benefits would be a good idea. it would not only put us back at square one where our finances are concerned, but it would also go some way in showing my DD that it is ok to live on handouts whilst contributing little or nothing to the economy on the whole. it is a personal choice and not one to be taken lightly just due to the fact that we 'may be better off' as the financial margin is so slight that it wouldnt be worth it for us IMO
my DH has actually started as a self-employed subcontractor wednesday this week and has 8 weeks of work with this particular company but beyond that we just dont know. regardless we will both try to stay in or find employment as i firmly believe that benefits are not the answer or cure-all for everybody.

Have no idea on the best thing for you, but I second finding evening and weekend work for you so dh looks after the children. We have been doing that for years and it is the only way we cope financially.

It depends PandaElis I am not suggesting that it's ok for people play the system if you can keep your head above water, but if the shit hits the fan than sometimes it's the only sensible option.

When you are in debt you only have 2 ways to get out - increase income or reduce outgoings. So second jobs if they are available or making the children share a room while you rent one out or you cut what you spend. Do the children have fre school meals? Most people hate the idea of a lodger but it could be better than losing your house.

Possible that you may be entitled to a tax refund or extra child tax credit if your partner has earned less.

MillyMollyMoo Your post of 16:39:51 is the lie that our generation has been sold for years.

The OP is not better off clinging for dear life to a house that she is renting from the mortgage company.

My parents bought their house from their council in the 70's. They moved to a bigger house, and over the years my Dad was made redundant several times. Still they clung to the house. Went interest only. Now, they are approaching retirement age. Debts up to their eyes, too ill to work but not entitled to mortgage help. So they are having to sell up and move around 400 miles to afford a property. Leave everything and everyone.

Had they accepted years ago that they couldn't afford to buy the house, and were, in effect, renting it, they would be in a position now where they didn't have lots of debt. They would perhaps still be renting, or they might never have got ill because of the stress of making ends meet.

DH is on a low wage, working 34 hours per week. One of our DD's is disabled, and I am her carer. It is such a comfort to know that if our income goes down, our Housing benefit goes up. Our rent is £650 pcm, and we get £437 in HB, leaving us £213 to find. There is no way on this earth that we could manage a £650 mortgage payment, plus £50 home insurance, etc.

Sorry to harp on, I just feel so strongly about people renting from mortgage companies in the belief that in some way they own their homes, and them struggling to eat.

yes it really is dependent on the individual circumstance. whilst we may get things such as interest on our mortgage paid and council tax etc we would also still have other things to pay for and there is the 'guilt' factor to consider aswell. what i mean by that is my DH was raised to believe that he HAS to work and i was raised and decided i SHOULD work (both of my parents were long term unemployed contributing to my not so good upbringing) and i have a compulsion, of sorts, to making sure i give a better example to my DD (and any DCs we have in the future) i also think that with the economy being as it is it is a very selfish move to voluntarily choose to be unemployed when hundreds of thousands of people who WANT to work have no such option.

lou is 100% spot on

Lou it's about the children's stability nothing else, I agree with every word you've said but whilst AST's are so insecure for the sake of £35k which will end up in somebody else's pocket anyway I'd be sitting tight.

The truth about affordability when it comes to mortgages is that more than 1/3 of your total salary is unaffordable because there's no margin for error.

And if we're honest it may not sell right now anyway even if they put it on the market tomorrow.

Lou it's about the children's stability nothing else, I agree with every word you've said but whilst AST's are so insecure for the sake of £35k which will end up in somebody else's pocket anyway I'd be sitting tight.

The truth about affordability when it comes to mortgages is that more than 1/3 of your total salary is unaffordable because there's no margin for error.

And if we're honest it may not sell right now anyway even if they put it on the market tomorrow.

But that 35K is only 35K today. By May that 35K could disappear completely, meaning that the OP has no way of satisfying her debts.

Panda, I admire your work ethic, I do. I can understand that you want to set a good example to your children. But tell me, if your children were coming to you for advice, and they told you that if they sold the house they could afford to eat, and if they didn't they were looking for things to sell so that they could pay their utility bills, keep their children warm, etc., what advice would you give them? Would you tell them to cling to the house, or would you say "Sell up, clear your debts while you can. Tighten your belts, and be glad that you had the equity to clear them in the first place."?

But if you reach the point of no return then there's the option to go bankrupt, wipe off all the debts and probably keep the house too.
I'm no expert but that is basically what our old neighbours did, he owed £65k on credit cards and I think that's the key as long as it's not secured debt they should be able to stay in the house.
Things have changed since the last crash/recession I do not believe that there will be the flood of repossessions some are expecting/hoping for in order to cash in on others misfortune.

And if you're expecting drops that quickly lou, then it's already too late for the op.

lou my point wasnt that the OP should keep her house at any cost it was that relying on benefits is not the only answer. if my DD came to me and said she would have to sell up to afford to live then i would say well sell up! there is no shame in renting a house as as someone else said you dont "own" the house until the final payment is made anyway so you are effectively renting long term. my 'work ethic' was in explaination to my response to milly and just my own view

Panda, my apologies - I was addressing you as the OP. I see you are not!

no probs lou we must look alike i suppose

lou031205 - your post @19:05:32 was spot on.

I am sorry to hear about your parents but a very large number of people are about to discover home ownership is a very expensive way of living with falling wages and falling house prices.

blackmonday - you also need to know that your creditors can go to the courts for an Attachment Order to secure your other £35k of unsecured debt to your house if you do not keep up with payments. They cannot force you to sell but if you do ever sell your house, the Attacment Order allows them to reclaim their money (after the mortgage company has had theirs) before you take a penny. It is becoming a very common tactic by creditors where someone has unsecured debts like personal loans and credit cards that they are not keeping up payments on.

Betadad so what if they do put a charge on the property, if long term she plans to pay them back then it buys her time.
And over the term of her mortgage no doubt the £35k will be inflated away to peanuts.

If she gets to court the judge will do everything in his/her power to keep the family in their home, nobody wants thousands of repossessions and homeless families.

OP you have to remember that some would like you to put your house on the market, so they can point to the flood of properties and drive down the prices of the desperate.
Everyone has an agenda.

Prices are already on the way down again and if you keep putting charges on your property or remortgaging and the correction this country needs does happen then you will be in the shit!

MillyMolly - I have dealt with several families in ths position in the last few weeks. It is hellish for them. In addition, hanging on tends to just rack up huge fees and charges for arrears, unauthorised overdraft, court orders, debt managment, etc. That that will just eat away at what little equity the OP has.

There is a point at which hanging on really is not worth the stress. If the house gets repossessed the mortgage company will just sell it for what it can get and the creditors who get an Attachment Order will get the rest and maybe the OP will still have some unpaid debts left over. The OP could get more for her house in an orderly sale in her own time and maybe still clear all the debt if she sold now.

There is no guarantee the debt will be inflated away and with the high interest rate on unsecured debt plus all the charges that is very unlikely - unless we have hyperinflation. If we have deflation the debt grows in real terms anyway.

noddyholder The correction this country needs should have on paper happened in 2005 and it did not.
You have no idea what'll happen next, neither do I all bets are off.
If she has no equity because prices are down then she has nothing to loose by staying in the house until the day the bailiffs throw her out.
But if she can get through the next 5 years treading water she'll come out the other side with her house and her children won't have been dragged from pillar to post in the meantime.

I am fairly confident rates will rise and prices will fall later this year and tbh no economist can really see an end to it.Have been working in property for years and have taken advice and really think clinging on to something that isn't even yours in the hope of inflating away the debt is risky stressful and pointless.Why not have alife rather than an existence.i have made money on houses and am mortgage free but still hope a correction occurs

btw all labours little tricks for averting the recession and price falls over the years have been used up

I'm sure you would like a correction noddy, you've ridden the bubble made money out of the pyramid scheme that has become the housing market and now you'd like a correction so you can start all over again.
It's not illegal but it's hardly impartial advice and the same applies to betadad, he is a long term renter waiting to pounce when the price is right.