Would you sell your house to pay debts?

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We are struggling with considerable debt and our house has quite a lot of equity in it which would easily cover our debts and leave us with a large chunk towards a decent deposit on another house.
Would you consider selling the house and renting for a year to improve credit rating and then get a mortgage with the deposit?

But if you clear all your debt and then run your accounts and credit cards well for a while, surely this helps improve your credit rating?

I remortgaged to pay off a load of debt. Don't do it and use the credit again you will end up with a bigger mortgage and more debt. A right pickle of a place to be in. I cancelled the cards, paid off the loans, deleted the overdraft. Never again will I be in that place again.

What is your advice then HeCantBeSerious ?

To get advice from someone's qualified to give it. My friends thought it was going to be messy and upsetting but have found a new lease of life through it. They own less clutter, don't need to work 24/7 to service a massive mortgage and can enjoy life again.

(They moved in Sept so it's a recent success story.)

A good whole of market mortgage advisor will be able to tell them if it's possible.

But if you clear all your debt and then run your accounts and credit cards well for a while, surely this helps improve your credit rating?

What do you want to improve your credit rating for?

You already have a mortgage and presumably you want to wean yourself off the unsecured credit habit anyway?

Requalifying for a mortgage as a tenant under new rules will be harder than last time you did it. Meanwhile, you'll incur moving expenses and incidental costs and miss out on appreciation.

Prioritise paying your mortgage. Tackle the other debts by any means possible (DMP or IVA) until they're gone and sit out any bad credit for six years until your record is clean again.

Have you spoken to Stepchange or similar?

We did it 18 months ago- best thing we ever did. We had a 3 bed house we'd done up and had a loan/loan for a car and credit card debt. Nothing had ever been defaulted on- we were simply fed up of forking out about £400 a month in fees and repayments. We knew what we had done to the house had increased its value- we'd paid £212,000 for it and sold it for £268,000 and what with the mortgage we'd paid off during our time in the property we had £70,000 equity. We've now no debt and still had enough deposit for a bigger house at 15% loan to value.

What is your total debt?

What is your total income?

What are your main outgoings?

What's your total mortgage and your monthly mortgage payment?

What's your house value?

It's worth considering what this will cost/save you over a 5-10 year period (e.g. you'd save on debt repayments but you might have to pay more in rent or on new mortgage, plus estate agent and legal fees etc). I don't think I'd do it unless you've got a very aspirational house at the moment which you can't afford. If it's a normal family home I'd be trying to keep it.

Renting is dead money, so if you said sell to pay off the debt and down size into another home you own, but I wouldn't advocate selling to rent.

Mortgage of £120k, house worth £200k, debts of £35k but making day to day life difficult....
We want to build our own house so figured we could sell our house, pay off the debts, and rent until we find either a house we can develop or a plot of land....

So you'd have 45k to fund fees and towards another property. That could still enable you to buy a smaller/cheaper property ( say 125k) rather than rent.

I wouldn't. A friend did this a couple of years ago and is now in such a worse situation. Rent is higher than mortgage.. letting agency fees and credit checks etc are ridiculously expensive. She wishes she'd never sold the house and made do.
Now she can't afford to buy again in the area her children are at school in.

Have you looked at your credit files?

Do you have any defaults, late payments or other negative data yet? Or is it still a perfect record but you're struggling with repayments.

I think it's fine as long as you're not in rented too long.

Manumission - we have a lot of debt which lowers our credit rating but no defaults or late payments.

Have you tried fully costing the whole thing out for both scenarios?

It might also be a good idea to read the full lending criteria of a few self-build mortgages.

If you sold the house, paid the 35 k debt, and bought another house for 160k, yes, it would work.

But selling, coming off the property ladder for a year, and then trying to build your own home is probably a very bad idea sorry,

Mortgage of £120k, house worth £200k, debts of £35k

I wouldn't get off the property ladder now...no one knows the way things are going to go. House prices may rocket, banks may batten down the hatches and make new mortgages much harder to come by. Too risky IMO.

We're in the position of no debts, decent equity and income but shit credit (due to seriously hitting the financial skids around 3 years ago) but we desperately need to move. We have 2 dc and dc3 due and are in a 2 bed house. We could easily afford the mortgage now but no bastard will give it to us due to the CCJ and defaults on our file.

Anyway...we're moving into rented next year because we need more space. Credit won't be an issue as we can pay 6 months rent in advance. BUT we're renting out our house rather than selling it. Plan to stay like this for about 3 years until our credit history clears and then sell our house and buy again.

I'm worried about moving into rented because it's so insecure but we have the security of still owning another house to back us up.

It sounds like you are still trying to fund a lifestyle you can't afford. How much is it going to cost to self build?

If you sell now you may clear your debts but it doesn't sound like you have a strong onward plan so you will be stuck in rented and regret it.

Don't do it, pay off the debt instead. Otherwise you'll still have to buy another house but smaller.
Read this

www.debtproofliving.com/Calculators/RapidDebtRepaymentPlanDemo.aspx

You also need to factor in the cost of selling, moving and buying, so maybe 10k? Also house deposits for renting

Debt doesn't lower your credit rating. Being able to successfully service that debt IMPROVES credit rating.