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've been through all our bills - cancelled sky a while ago, haven't renewed my phone contract and have a cheap sim only deal, reduced the cost of our weekly ship, don't but branded stuff etc. We don't have a huge amount to sell, but I have sold all our baby items, etc, that are no longer used.

I do understand those of you saying don't go on my sister's hen do, etc but I guess that is where my frustration lies. Why are we living in a lovely big house, but potentially missing out on events that are hugely important to me and worrying about how I'm going to buy petrol? In contrast we could still have a perfectly nice, if smaller, home but no debt and disposable income to actually enjoy life again. The past few years have really taught me the lesson that anything can happen and having a smaller mortgage and much more financial flexibility in future really appeals. However maybe I just feel this way because I am in the eye of the storm at the moment, and in 6 months when I can see the light at the end of the tunnel I'll feel differently.

I would remortgage and consolidate the debt to give you some breathing space. Then either move without the fraught needing to move situation or pay extra on the mortgage to reduce its term.

Oh I see you would shave fees. They might give you a further draw down still or you could look at a loan to consolidate the debts.

If you have that much equity OP could you get extra on the mortgage? Or go interest only for a short while until those loans have finished?

We are in a similar position, we are lucky in that we have lots of equity so rather than struggle every month we have decided we're going to add £20,000 to the mortgage to pay off debts and go interest only until DH's new job gets underway. We have also been made aware recently how short life is and how important good mental health is.

Have you spoken to a financial advisor at all?

I would definitely sell - but I did exactly this to live a financially comfortable life because personally money worries really stress me out. I also live in a part of the country where a 350k home is lovely but not really necessary and a house half that price is perfectly okay.

Are you both working btw? Can’t see that anywhere. That would obviously make a big difference, depending on what your income is

Consolidating debts into the mortgage will cost you an awful lot more than if you juggle them around on credit cards. I'm in a similar predicament but I'm reluctant to pay 000s more in interest by putting it on the mortgage. The debt hasn't gone. You've just spread it out over 25 years instead of 2 and it'll cost you a damn sight more.

Go on the money matters boards here and look for a poster called talkinpeace - she name changes regularly but she's pretty easy to find. Shes done some calculators to show you your debt can be paid off quickly if you pay just a couple of pounds more than the minimum payment. If you pay the minimum it will take you 20+ years to pay off. If you pay just a £ more than the minimum it could be gone in 2.

Don't sell the house. Very knee jerk reaction to a problem that looks huge but isn't necessarily.

Get an evening job. If you can, rent a room out.

Have you got 2 free council tax months? This will give you breathing space till your loan is paid off then use that money to chuck at the most expensive debt. Google snowball calculator. - you can play with the figures on that

I think you should stay until the 2 loans are paid off. Until then you cannot afford to move without additional debt. It costs money to move and not all of it can come from the sale.

You need to be more honest, lots of people can't afford all the financial setbacks you have had, there is nothing wrong with saying 'it's too expensive for me' to your sister.

What are your incomes? That makes a difference to the decision if low income to debt ratio then downsizing is the way to go as you will always struggle.

Are your jobs reasonably secure?

Can one of you get an evening/second job? I know if you're already both working full time it will be exhausting but a few shifts a week in a pub could bring in an extra £150 or so a week.

You say you have a nice big house. Is there the potential to rent out a room? A lodger could bring in a good boost in income and would be tax free. If you can't have a lodger is there a garage or parking space that could be let?

If think you need a boost in your income over the short term to get you straight now. If the extra income went on longer term you could really get yourselves in a much more stable position.

I know all of the above will change your day to day lives to some extent but you're not going to improve your position unless you do something like that.

Can you rent out one or indeed two of your bedrooms to a weekly lodger or Air BNB ?

Op we are in a similar situation. Our childcare costs reduce significantly in September but can’t really throw money at the debt until then. (Credit card)
A loan ends in December 2021 .
You sound very close to things looking up for you. We are a little while off yet.
I honestly would sit tight.
It seems so far away for us and I’m honestly sick to the back teeth of it. We earn ok money, both work full time and really don’t know how we have got into this mess. We have a 2 year old. Don’t go out. Don’t buy loads of clothes or buy expensive items. But like you just been hit with a succession of blows financially and it’s hard when paying for childcare.

We thought about selling our house when faced with an enormous unexpected tax bill. We would have downsized, moved to a smaller house in a cheaper area.

I am so glad we didn't! We went interest only on the mortgage for a few years and looked again at all our other expenditure. We severely tightened our belts. Things are better now. I'm glad we stayed put, our house still needs a ton of work doing on it that on paper we should have been able to afford. But we didn't need to move our dc schools, we didn't have to say goodbye to the neighbourhood we like, we didn't have to pay a huge sum in stamp duty, solicitor fees and moving costs.

It costs a HUGE amount to move house. Avoid if you possibly can.

Can either of you or both of you get a new job on more money?
Get a lodger?

You could speak to your mortgage provider about possibly taking a mortgage holiday for 3/6 months. It would help you out in the short term

You've lost perspective. Yes, no problem making a medium term plan to downsize. But making a huge and expensive life change rather than disappoint yourself or others seems disproportionate. You have a great asset, you don't need to sell it hopefully. Well done for getting to a point again where ends nearly meet. Try to access your equity to cover the gap.

Yes we both work full time on decent salaries so income to debt ratio is not particularly massive (I earn £53k, DH earns £62k). It just feels massive right now as it is growing rather than reducing, and I feel like it is slightly out of control. DH works away during the week and every other weekend though so I'm mostly on my own with the kids, which makes a second job for either of us difficult. It also makes me feel a bit uncomfortable about the idea of a lodger as with him away and two small kids in the house I'd need to know and trust the person very well. Thanks for the advice and helping me thrash it out. I'll try and fight my instinct for a quick fix and give things another 6 months or so to improve.

Can you not remortgage ?

On those salaries OP you definitely need to look at your outgoings. Your mortgage will £1k max unless you're on a really bad deal. Where is the rest of your money going? You're bringing in £4.5k ish per month.

I absolutely would not sell up. You’ll lose money and be in a much smaller house. In 5 years time, you’ll probably kick yourselves. If you really want to go to the hen, could you Maybe borrow some money off your parents? Or ask for it to be in lieu of any future xmas presents if they buy you stuff. I realise of course this would have to be the last loan.

A payment holiday or temporary interest only would be a good way forward.

Cross posts just seen your incomes. I’m also scratching my head to see why you’re struggling so much.

Can you breakdown your monthly costs, you have a very good amount coming in every month, where is it all going?

Frankly, you were incredibly dim to go on a hen do you couldn't afford. If you're considering selling your actual home, your family home, due to debt, that was beyond bonkers. Your sister would have understood ... (and if she didn't, going really shouldn't have been a priority for someone so incredibly selfish).

Suck it up for 2 months until you pay off your loan, then look to cut corners elsewhere first. See if you can alter the terms of your mortgage in the interim.

Evening babysitting/weekend babysitting could also bring in some cash.