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?

What on earth are you spending your money on?! That’s the best part of £6500 take home between you, although that would assume no pension payments. But still - a heft amount.
Mortgage shouldn’t be more than £1000 for £175K went you have 50% equity.

I wouldn’t be against a plan to downsize for more security. But I think this is a knee jerk reaction, and you should get in top of your debt first and then decide if it’s really what you want.

Putting Barcelona on a credit card is ridiculous if you’re really only just meeting exciting outgoings. If you carry that type of thinking with you to the new house, you’ll end up in debt again.

I'd try to find some spreadsheets that track the reducing debts. It's motivating to visualise the light at the end of the tunnel.

Once you've paid of the £325 loan, you can chuck that at the interest paying credit card. Or put it into DH's loan to get that paid of quicker and releasing another £300 per month. If you're dedicated, you can get both paid off within 6 months and an extra £625 to pay off credit cards. Or £600 repayments and a £25 takeaway treat. Then it's only another 6 months or so until you have lower childcare costs and extra £ to pay towards debt. Or £25 into savings each month.

Set us some spreadsheets and you'll quickly be able to see your diminishing debt, and be able to plot a likely Debt Free Day Of Celebration.

Even the 2 loans finishing this year...
In 2 months time you are +£325. Put that into his loan* and he has by then 7 months to go, but it’ll be paid off in 4.
So by the end of August, you are +£625. Which is loads.

*just for illustration - it might not be financially the best loan to pay off first.

You must be making minimum payments now. So your 2 options you give (minimum payments for 18 months vs sell house) aren’t your only 2 options anyway.

The “magic” third option is joining MSE for advice, snowballing your debts with above minimum payment and REALLY getting a handle on your spending. The Barcelona trip was a mistake. The car you had to replace... you don’t have to say, but be honest with yourself - did you spend more than you had to? This is your third way. And as I said above, once you’re approach is sorted and working THEN make a properly thought out decision about the house.

Get a Monzo account to tract your spending

You need to work out how much is debt/bills etc and normal weekly spends and see where to extra cash is going

Our morgage is higher - we earn a lot less but have no childcare costs as such.

DH has a new car but that’s £150 a month £9K car

Plus where we live utilities are higher although tax is lower -

You need to have an honest conversation with DH because you should be able to save loads rather than in debt (x mortgage)

If you have increased childcare costs as a result of a work trip that your company want you to attend, work should cover this on expenses.

You guys need to budget because you're on good salaries, I don't get why you are so stressed....budget well for a year and you will be in the clear.
Moving house is so expensive & stressful.
Can you get an au-pair to help with child care?

@Viebienremplie it’s a specifically excluded expense in my (very large) company’s expenses policy. OP is on £53K and being paid to go on career enhancing conferences. She certainly sounds salaried and probably has a “hours around the needs of the job, within reason” type clause - which means they can ask her to do this travel, and jeans her childcare costs are her own business.

I do think you should go to Barcelona, if I was your sister and knew what you and your dh earn I would be pissed off if you didn't prioritise that.

I know, it is ridiculous that we are this tight for cash when we are both earning well! We do have a couple of extra expenses which add to our outgoings - as DH works away, he has a flat in his work location where he stays during the week, so has separate rent, bills and food costs for that. I also work about an hours drive from home and between that and ferrying the kids around at the weekend probably spend more than the average in petrol. But it is basically our housing costs and debt repayments that are killing us. Our combined take home income after pension, tax and other deductions is £6350. We pay out the following per month

Mortgage - £910
DH flat and bills -£350
Council tax - £245
Childcare for 2 kids - £1250
School fees £300
Electric - £90
Oil - £150
Petrol (me) £350
Travel costs DH 150
Food -400 (£300 family food, and about £100 for DH)
Car insurance/tax for 2 cars - £170
Life insurance for me - £40
Phone (me) £20
Phone (DH) £45
Internet £25
Tv licence - £13
Kids swimming/dance classes £160
Loan - 325
Loan - 300
Loan - 300
Credit card 1 (me) 300
Credit card 2 (me) 200
DH credit card 250

So basically if we could ditch the debt all would be fine, especially as childcare costs will go down a bit. It's just getting through in the meantime.

Oh and the reason we both travel so far for work is that we moved to a small town where my mum was based as she was helping us out with childcare for our eldest so it was convenient. She's not in a position to do that any more, and realistically it is tricky to get jobs like ours in the local area. But DH is definitely looking to get something closer as soon as possible

Bloody hell your car insurance is high!

£65 a month for 2 phones? Is there a reason you need to pay so much, can you change your contract, do SIM only?

Your DH is spending a lot on food for 5 days a week, can he cut back?

Swimming and dancing should be put on hold, you can finance your credit card from that.

I don't know how much oil costs but £240 per month for both combined every month of the year is a lot, can you reduce that?

I agree your car costs are high - are you high insurance risks?

That’s over 2,000 a year on car insurance, that can’t be right?? Unless you are driving a Bentley?!! Go online tomorrow and look on comparison websites, this must go down. I have a big beast of a car, a discovery, and that’s less than £500.

Take the kids out of classes for a start. I'm looking at the school fees too.

Do you run expensive cars? Sell and buy something cheaper so saving petrol.

Halve your phone bills.

You haven't budgeted for repair to house or car.

To be honest, I think downsizing would be a sensible option. Your debts are the problem. You need to live cheaper and build up a savings pot for unexpected costs.

Sorry, just seen that’s tax too. Have you high road tax cars? Maybe sell the most expensive car and get a really small run around that’s very low on tax?

It's car insurance and tax for 2 cars, the tax could be £200 per car so £800 each for insurance, that's not massively outrageous depending on where you live, previous claims etc but obviously should be checked for any saving

What are school fees? Is this after school care or private? I’d look at local state school if it’s private??

Your energy costs are very high for people who aren't in the house a lot.

Could you work from home a day a week so your petrol costs are slightly lower?

What's school fees? If private move to state.

Would you be better off moving to near your job?

Your oil costs are huge
Our 4 bed is £600 per year
Your cars are high - what are you driving?

A 30k loan over 5 years would be £550 a month better than £1750 isle your paying now

Personally I wouldn’t ditch the dcs ecas or your sisters hen do in Barcelona.

In a couple of months you will have an extra £300 per month.
What is your smallest credit card debt.
Could you plough as much of the £300 in clearing that debt then do a balance transfer from the next smallest credit card debt on to that one then concentrate on getting that one down and so on.
Or target the card with the highest interest rate first etc

Only pay to the penny the minimum payments on the rest .

Can I query one of your outgoings

The school fees at £90 per month?

What exactly are these? Is it lunches and day trips?
I am thinking it isn’t private school fees unless you have missed a 0 off the end

How long before you don’t have childcare. That is a huge amount that could target credit card debt.

I wouldn’t move atm the expense of just moving coupled with the early payment charge on the mortgage would make it unreasonably high

Although I would think about moving to be closer to work in 2 years time when that early repayment disappears

I don’t think it is your housing costs that are the problem I think it is your credit card and loan debt

School fees are £300 per month, electric is £90.
The consolidating loan of £500 is far cheaper than the £1750 a month, I’d really do that, still paid off in 5 years rather than putting it on the mortgage.

I definitely wouldn’t move yet, now you’ve said your husband is looking for work closer to home. Why tie yourself to a house when you don’t know where his new work is? Get the job first, and take that into account when looking for a new house - wrong side of town can add a lot to commute time and costs!

Do you own the flat your dh lives in during the week.

Could you rent that out Friday and Saturday nights and when dh is on holiday.

Depending where it is it could be anywhere between £30-£65 per night

At the lowest £30 per night and a couple of full weeks (without bank holidays) with 50% occupancy it would be at least another £2000 per year income.

If in a good town and goes for £65 per night and 3 full weeks at 75% occupancy you could be looking at nearer £6000 per year

Depending where it is it could be more.

It seems like there's no end in sight but I do think long term you will regret selling if you see this as your forever home.
In a years time your outgoings will have changed massively by the 2 loans and reduced childcare fees.
I think you need to see it though the year and keep trying to reduce where you can.
I agree that after school activities can be put on hold. They don't need them, it's a nice to have.
I think you can reduce the food shop for both houses.
Have you spoken to the bank about a possible mortgage holiday? They will offer breaks in paying I think for a maximum of 3 months, it means it's extended at the other end of the mortgage but the 3 months would help clear some of the smaller depts and get you some disposable income quicker to put elsewhere. Or alternatively do a further advance if they will allow and borrow some of your equity to clear it all at once and be done.
Moving may increase things such as travel a month if your travelling more for the school run etc.
I think you have many options before you get to the point of selling the house. You just need to look in to them.

Does DH really need a whole flat to himself? Could he rent one room in a house?