Should we sell our house to pay off our debts?

[wheredidallthemoneygo]

DH and I have had a tough three years financially with a number of unexpected events hitting us in quick succession, and have gone from having plenty of disposable income and not many money worries, to being completely crippled by debt. We are at the point where our incomings just about cover our basic outgoings, but anything out of the ordinary is going straight on our credit cards and we're just about keeping up with our repayments.

Some of this is short/medium term - I have a loan that I will finish paying in 2 months time which will free up £325 per month, and DH also has a loan which will be repaid in around 8 or 9 months which is £300 per month. Our youngest has just turned 2 and is in full time childcare, so in about a year's time our childcare costs for her will significantly decrease.

But at the moment, the stress of having no money is really getting to me. My sister is getting married and had her hen do this weekend in Barcelona. I really couldn't afford to go, but as her maid of honour there were no excuses I could give so I had to put the lot on my credit card. I am also going to the US for a conference with work next week. This will be really beneficial for my job but will mean extra childcare costs while I'm away, plus I will have to incur my expenses up front and then claim them back next month. I honestly don't know how we are going to make ends meet without racking up even more debt and it is keeping me awake at night worrying about it.

I think we have two options - either sit it out, keep paying the minimum amounts back on our cards until some time in the next 12/18 months when we have more spare cash to throw at the debt, or we put our house on the market, try and sell up and move somewhere cheaper. We have a reasonable amount of equity in the property so could probably half our monthly mortgage costs and pay off a good bit of the debt. I am inclined to go with this latter option as I feel it is likely to get us out of this hole faster, but DH thinks it is a bit extreme and that we just need to push on through for a bit. Anyone got any advice on which option they think is best, or a magical third option that we haven't considered yet?

I think you should try to hang on to your home; however tempting it might be to pay off your debts early, it could be very difficult for you to get back to home ownership. Is there any possibility of asking work for an imprest for your conference?

In view and your Barcelona trip I expect there a lot of things you could cut back on.Check all bills and reduce those you can and cancel those that aren't essential.
Is it too late to cancel Barcelona as there will be more costs on that once you're there.
Zero credit cards if your able to .You say you paya loan off but you still have credit card loans to pay back too,start paying off the one with the highest interest.
Get frugal for Lent no alcohol,eat vegetarian,only packed lunches,seasonal fruit.
This is short term but selling your house is madness as you loose thousands with agents fees,solicitors and that's for 2 houses.

Why did you agree to be MOH?

Why didn't you tell the BTB about you cash flow problems?

You didn't have to agree to this and you didn't have to spend more money you didn't have.

No, don't sell. Not yet any way. You will want to be in a good area for schools etc.

Cut the budget as much as you can and approach the mortgage company about freezing you mortgage for the next few months.

If you sell your house, how much equity would be used in fees?

If you moved to a smaller place for example, how long before you would want to move again to something like you have at the moment?

Honestly OP It costs to move... estate agents, solicitors etc.

There’s a calculator on rightmove for moving costs!

I don’t know why everyone is encouraging you to stay, if you could pay off a lot of this debt and halve your mortgage costs: you sound really over-extended.

I think without knowing the amounts it's impossible to advise.

Selling the house if there's 15k of debt would be ill-advised. But if the debt is more like 50k, and the house has a 100k of equity (leaving 50k for a deposit on a smaller house) then that might be worth considering.

It would take over 2 months to sell your home by which time your outgoings will be less anyway. It could even take 8 months and also costs thousands to move and you need those thousands to pay back your credit cards.

If you have a good amount of equity then see if you can extend the mortgage or go interest free or similar. Or if you have the option to underpay it or pause payments for a while?

And definitely you should not have paid for Barcelona and you seem to be still living like previously when you had spare income.

The first thing you need to do is open a credit card account that charges 0% and do a balance transfer to it for all outstanding credit card debt.

Under no circumstances should you sell your home.

Don’t sell. Can you consider

Cards on 0%, if your credit rating is good
No new debt- if you can’t afford it, don’t buy it
Can anyone help with childcare if you reciprocate? Eg you do evenings, they do daytime
Ask work if they can find a way so you don’t have to front the trip costs
Look at all your monthly expenses and see if you can cut any of them
Mortgage on interest only although bear in mind that some lenders will not do this if you are in financial difficulty (seems strange to me but is definitely the case with some) so check before asking your lender, they also might not accept your moving to interest only if you are selling

Good luck

Moving house seems to be a very long-term solution to a short-term problem. If you're just 8 weeks away from being £325 a month better off, you'd do much better to ride it out. But you need to change things.

Why can't your DH take time off work during your business trip, instead of paying for childcare?

Why can't you tell your sister how skint you are?

Paying off debt means cutting things SUPER THIN.

I'd phone the mortgage provider and ask for a repayment holiday. I'd also look at if there is any way to make your existing debts cheaper. I wouldn't move at this point - certainly not to fund a hen do! The childcare thing is a pain but I'm be looking at a less drastic solution than selling your home.
Magical 3 rd option - could you extend your mortgage to 30 years? Or remortgage over a longer term than you currently have? Then overpay once you have the debt paid off?
Good luck!

So to answer some of the questions -

Our house is worth around £350k, possibly slightly more. Our mortgage is around £175k so we have around £175k in equity, possibly slightly more. We're 3 years into a 5 year fixed rate deal so we'd have early repayment fees in remortgaging (or moving for that matter). It is a large 4 bed house in a lovely location - we stretched ourselves slightly to buy it and it should have been fine, but throw in an unexpected pregnancy and maternity leave, DH having to take 6 months unpaid leave to care for terminally ill FIL, my mother who used to look after my eldest having a stroke so having to pay additional childcare costs, having to replace our boiler and having to replace one of our cars we are now well and truly in a hole.

Our debts (ignoring my loan which is almost gone) are around £20k in credit card debt between us, DH's outstanding loan of about £2.5k, and another longer term loan he has with about £8k left to pay off.

I do appreciate that there will be fees, etc associated with selling, but I have found the last year in particular so stressful that I would quite happily sell up, pay our debts and buy an easy to maintain 3 bed new build for around £175k with a tiny mortgage which we can aim to pay off in the next 5 years. DH loves our house though and is really reluctant to sell. I love it too, but am honestly so over working hard and feeling like I'm getting nowhere.

I agree with the majority. Stay put, tighten your belt, learn to say no to costly invitations.

There’s light at the end of the tunnel OP. Don’t worry.

Oh and both DH and I have interest free credit cards, but I could only get accepted for about half of my total debt - so I have £5k on an interest free card, and around £4k incurring interest on an old card.

Whatever you do, never sell your house to pay unsecured debt.

It sounds like you will soon have a bit more money and be through the worst. So have a look on money saving expert for some ideas on how to save money. As others said, go interest onlyfor a few months maybe.

And I say this as someone whose partner revealed a 50k secret debt and who fought tooth and claw to keep her house!

Go through your outgoings with a fine tooth comb

Utilities, Insurance’s on comparison websites
Food shopping from Lidl.
Go vegetarian (H&B do bags of dried minced soya for £1.99. We buy 2 every couple of weeks)

No alcohol

If you can, change to interest only on your mortgage for a period of time.

0% Interest credit card

Once you have cut everything back look at earning more.

Evening and weekend jobs, do you have a driveway you can rent out for parking, Airbnb a spare bedroom or do you have s garage going spare that you can rent out for storage.

Sell anything and everything.

There are 2 ways of paying off debt. Either the Snowball method of paying off the basics then directing any spare money to the smallest debt

Or the Avalanche paying off the basics then directing any spare cash to pay off the debt with the highest interest.

You only have another couple of months before a £325 debt disappears and by the end of the year another £300 debt will disappear so by Christmas you will have at least £625 extra each month to pay off any other debts.

Hardly worth selling your house for.

@oliversmumsarmy completely agree with you!! Short term suffering is worth it in the long run and definitely not worth selling your house over

Could you get a lodger if the house had 4 bedrooms? Just a thought if it helps in the short term

Do you have equity in your house? Could you extend the mortgage by 20k and pay off all the debt? I don’t think you pay any extra fees if you remortgage and ask for more rather than reduce your mortgage. If all debt was then cleared would that make you feel better? I imagine an extra 20k on mortgage but no credit cards to pay would free up money??

what can you sell?
What can you reduce?
Where can you save money

You need to cut right back and think about the next steps

This is all short term

Its roughly £5K to buy a house and £5K to sell one

You can’t afford Barcelona. This mindset is why people spiral into debt.

Do whatever you can to keep your home. Have you ever overpaid your mortgage? If so you can often take payment holidays for a while. Could you remortgage over a longer term to get the payments down?

I wouldn't sell the house, you'd be waiting £000s in fees and it sounds like you love where you live.

Does your sister know about your debts, if she does she's a selfish knobber to expect you to go to Barcelona, you need to cancel that now, I simply can't understand the mentality of someone who acts like that.

Are you prioritising your repayments per Martin Lewis ie most expensive interest first/most?

You only have to get through a relatively short time to be able to see a bit of light at the end of the tunnel, I'd ride it out.

If it were me, I’d take a further advance on the mortgage and pay off the debt that way. You have more than enough equity and if you moved, you’d probably wonder why you did it for the sake of £20-30000