Selling asset to settle debts?

[financialdisasterzone]

Looking to gather advice/experiences of others who have been in a similar position to us to try & work out what to do.

Household income is approx 120k pa. we have the usual monthly outgoings, although no childcare fees. However our debt outlay is approx 1.4k per month. Lots of this is credit card debt, £150 is bank fees, we are in a mess. We are able to meet the payments & are repaying CC above the minimum payment. CC should be cleared within 4 years. I am not here claiming poverty (obviously) or after a bashing for wasting so much money, I'm after genuine experiences of how to sort this out. DH & I are both crap with money.

Our debt totals approx 36k. 2 loans will be repaid by 2023 of 15k & CC of similar should also be repaid by then. We have overdrafts of 5k which we constantly live in (thus the fees).

We have two properties which we rent out. Together they cost us 2.5k per year in insurances, service charges etc. One has equity of 50k. The other 3k. The property with 50k equity is the most desirable, central location, always rents easily & least maintenance costs as it is in a block. The second property is a bit of a drain but we are tied to it as have to pay 6k to extend the lease.

We are considering selling the property with 50k equity & settling our debts. However really worried about losing this valuable asset. Furthermore our pensions are not great atm. So this property would provide us with an income in the future. Part of me thinks we should ride out these next 4 years, try better to budget & keep the asset. The other part wants to take the easy option, sell up, settle & start afresh...although I'm also worried we wouldn't have great saving intentions if we take the easy option?

Any advice? Any experiences? TIA

Wrt selling the house, I think you should definitely ride out this trying period and keep it. The second house would be better to sell, the extended lease means you're more likelyto get a higher price for it.

When it comes to your general debt and money issues, I think it would be helpful for you to visit the money saving expert site and see how you can create a budget that would help you enjoy life while still being able to pay off your debts. If you sell the house I fear you may still get back into debt because you've not tackled the source of the issue. You can PM me if you need any additional help.

I would sell the second property and cut your losses, losing 3k from the lease is the least of your worries.
Look up the snowball method from Dave Rambsy and follow it to the letter.

• create a budget, set an amount of “spending money” each per month. (£200-£300). The rest left over goes to debt.
• open a second bank account each, with no overdraft. Each month transfer the spending money. That’s it for the month.
• clear your overdraft first, then £1000 in savings if you don’t have any, and then smallest to biggest debt.

Good luck you’ll feel free once it’s gone x

Yes, I think you really need to feel the pinch to change your ways. And you both need to be totally committed - is DH on board?

Dave Ramsey first, YNAB second. YNAB was revolutionary for me, and judging by Reddit has been for many others too.

Thanks for replying with really sensible advice! Going to check out those boards now. We definitely haven't tackled the root cause which is our woeful approach to financial planning so starting there makes sense.

I'd love to get rid of the second property...it is a drain butvfinding 6k to sort the lease is a bit tricky at the mo. Thank you all

You can tighten your belts and pay down debt quicker on that salary.

Look at all bills and see if you can get them cheaper and cancel the things you don't need.

Get rid of the overdraft first by opening a new account with no overdraft and paying a fixed sum each month to the overdraft account. Transfer your bills etc to the new account, look on mse and use the switch service which makes it very easy and you can can £100 or £125 depending on which bank.

Now pay all the debt by snowballing them, it's explained on mse or Dave Ramsey.
You should be able to pay them down quite quickly if you cut back and stop spending.

Sell what you don't need and use that to pay the debts also.

Then save to redo the lease or get a interest free credit card solely for the lease costs and pay off when you sell the property. However do not sell the property until you have stopped spending and done the other things to do.

You may not need to sell any property but if you do, don't sell the easy to manage and appreciating asset one, this would be madness.