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?

@FourDecades I wondered that - or at least was going to suggest a Mon-Fri lodging. But looking at the £345 including bills... I’m not London with some cheap student areas, and I’d be hard pressed to rent a room for that!

School fees?
Swimming club and dance class?
When you have £££ of debt to pay off?

It's simple, you've been living beyond your means and you need to make some lifestyle changes in the short/medium term while you clear the debt.

There's lots of great advice on the MSE website on becoming debt free, maybe start there.

And regarding your work trip expenses - you should explain that you can't pay for it all out of personal money and ask them for a company card for use during the trip, or one of those pre-paid travel cards with currency on it.

PS Moving home would be a false economy. It would cost a huge amount in stamp duty, solicitors fees, removal expenses, etc.

Agree you should try to ride out until loans are paid off when situation will improve lots. What were the loans used for? are those expenses likely to recur

@gassylady OP answered that already. Page 2.

Actually i missed this:

"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"

With this in mind I would look into relocating, ideally to a location where you and DH can both commute daily (rather than DH having to live away during the week). Somewhere with job options in reasonable distance for both of you. If such a location exists!

Moving would be mad! I think you said you have £20k of debt at the moment. Moving will probably cost you another £10k. (Estate agent fees, solicitors, stamp duty on a new house, cost of getting out of your mortgage, removal services, the ad hoc things you end up buying after a move when you discover your sofa doesn’t fit in the new living room.)

You just have to hold on for another month and you’ll have an extra £300 per month. In 8 months you’ll have an extra £600 per month. In 10 months then over £1000 extra per month.

I thought that too but living in a less than ideal location is costing them a huge amount; they run 2 households and OP has high commute costs.

I don’t understand why everyone is so keen on you keeping a house when the mortgage is stressing you out so much. You aren’t going to move in with your mum - just downsize so that you can keep your current lifestyle. I’d definitely do that!

I think it’s clear it isn’t your forever home the commute. Is too much and it causing unnecessary outgoings

I would move closer to work stopping the need for the flat and downsize

Is this a joke thread?

You’re twenty thousand pound in debt yet wasting money on hen dos and expensive cars and dance classes?

Your priorities are all over the place.

What are you doing putting work expenses on your personal card?

You can’t be serious.

DH does share the flat with 2 others so I don't think there is much to be saved there (he rents, we don't own it and can't sub-let). I have thought long and hard about the school fees and clubs. I've stopped the youngest swimming as they're a bit young to get much from it. I will probably stop with the eldest too. I'm less willing to stop her dance classes as she enjoys them so much, it keeps her super fit and they are a huge part of her social life. I think if she took 6 months off she would feel really behind and probably wouldn't go back. The school is a (cheap) private one, mainly chosen because it is the only one in the area with a breakfast club that starts at 7.30 so allows me to get to work on time. I could move her, but she would be so upset at leaving her friends. I actually think moving to a smaller house in the same area would be less disruptive for her. I might also not save that much because I'd probably need to get a childminder to do the school drop off as the state school breakfast clubs open between 8 and 8.15 depending on the school. I would definitely do it if it was going to be a longer term problem though.

To those saying that the oil is expensive- it is! It is a big house and not cheap to heat. We have a 1000l tank which costs roughly £500 to fill. In the winter that will last a maximum of 3 months, but obviously we can go much longer over the summer. We put £150 away each month in a savings account so we under pay in winter and over pay in summer to balance out the cost.

I will get DH to look at our car insurance and see if we are overpaying. I did have a bump a couple of years ago that resulted in a claim so that definitely pushed up my insurance, but I guess it should be starting to come back down again.

Thanks for all your advice everyone, it is good to analyse our spending and think about all our options.

Our cars are a 6 year old Kia Sportage for me. DH drives a rusty BMW saloon from 1998 - definitely not a swanky car by any stretch, think he bought it for about £750 but tax is almost £300 per year I think.

@partygamer I think you are right in a way, I think it is time to get my priorities right. We've had a crappy few years and I think I am at the point where I don't care about having a fancy house and nice things. But I do care about spending time with my family, having the money to go and visit my sister if I want to and be part of her hen do, and I want my daughter to be able to go to dance class and enjoy doing something she loves. If we sold the house we would still be able to afford somewhere perfectly nice to live, pay off our debt and have the lifestyle we want so it just seems to make more sense to me.

Look at renting out a room Monday-Friday to a female lodger. Look on my spare room.com. I had a friend who did this to get her through a financially difficult crime. She only rented to business women. She got £1000 per month!

If you downsize - make sure once the debt is paid you don’t waste money.

You’ll need to save for things like university Christmas birthdays etc each month you’ll need a repair savings account
Car tax etc

Think longer term

*time, not crime! Nothing illegal going on

wheredidallthemoneygo With the cost of downsizing and the early redemption I think it wouldn’t be wise move.

Whilst it might seem easy to throw your arms up and throw in the towel and have all the debts gone it isn’t teaching you anything and I can see that in the future you could be back to where you started just with a smaller house.

You didn’t get into this debt over night. I think it is from gradually spending over your income for a number of years.
I have friends who were in similar position.

They were always treating themselves. They had worked hard that week so treated themselves to a meal out.

They “needed” clothes for work. £100s on a nice outfit
Monthly dry cleaning bills running into 3 figures.

Nice holidays costing thousands because they worked hard all year and they had a really good joint income

Eventually when children came their spending accelerated until they realised they were thousands in debt.

Sold the house, bought a smaller one and paid off all their debts and at the same time had an inheritance
(Not a huge amount but something that would give them a nice buffer)

They were going to stick to a budget and not get themselves into a mess with money again

Problem was they had never stuck to a budget in their lives

They bought 2 new cars to compensate for the fact they lived in a small house.
They carried on their lifestyle, treating themselves because they lived in a much smaller house. In fact their spending went out of control.
Then within a couple years they were back to where they were in the first place.

If you are going to be free of £625 of outgoings and maybe more within a matter of months I don’t see why you need to move straight away.

As I said I think you should move in 2 years when you are free of the early redemption

I would set yourself a target to spend the next 2 years being very frugal and doing as much as you can to get rid of the debt or at least transferring it onto a zero % credit card.
Then when you move take out a loan to cover any high interest debts that are still outstanding.

If you both work together then these debts will be gone.

It depends on how much you owe on credit cards. You need to learn to live within your means. Sorry d sis I just can't afford to go to Barcelona. Sell anything you no longer use or want on eBay. Can you give up Sky or Virgin? Could your change to an interest free card? Can you get through 2 more months until your loan is repaid? Only you know the answer. If you sell your home you will have to find somewhere else to live Renting is expensive. Can either off you find extra work? Babysitting? Gardening, it all adds up.

Don’t sell up. Moving/selling costs a lot, and rents are comparatively high at the moment.

Cancel Barcelona, you can’t afford it. Make a concerted effort over the next six months to cut spending - no takeaways, stop buying brands, nothing new unless you are replacing something like school uniform or a washing machine, wash your own car, do own manicure, give up alcohol & shop bought coffee, go interest only on the mortgage for six months,
Set yourself a challenge of how much you can save before midsummer.

It'll probably cost you £10k plus to move by the time you have paid the repayment charge, solicitors, stamp duty, moving van etc.

I'd be looking at your oil, is your heating always on? Oil shouldn't be that expensive. You're not in the house for most of the day!

Stay put and in the short term be incredibly frugal. It's not many months until you have £625 extra.

A PP is correct saying your debt has come from years of overspend. If you are frugal now and set a budget, in a year your situation should be very different.

You sound ashamed of your situation but you don't need to be. Easier said than done. Tell your sister you are broke at the moment but hope to have things a bit easier soon, tell your boss that if you go in the work thing they need to pay childcare costs. It's an expense cause by work not of your making.

Sit down and work out if you can switch anything to interest free eg credit card. Have you looked on moneysavingexpert?

@wheredidallthemoneygo your latest post shows that it's your mindset that has got you into debt. You want all the nice things now. If you sell up, you will be in this situation again in a few years. I am a former debt counsellor. This is what I know about

You can reduce a lot of your outgoings. Are you in an oil buying club? There will almost certainly be one near you and collective buying power gets you cheaper oil.

And your car insurance seems ridiculous. We insure three cars including a 4x4 and a BMW. on a multi car policy for less than £800, and that's with our 20 year old DC as a named driver on the 4x4.

Firstly I've known several people helped by CAP. Look them up for some sensible advice.

Secondly having a child in private school in your situation is ridiculous. As is a vague idea that DH will look for a nearer job soon. How old is the child in private school? How old is your other child? Will you end up with two in private schools that you can't afford?

Look into getting an au pair. You have room and this can work out much cheaper than your child care and private school for a 7.30 breakfast club.

And DH needs to be looking to change jobs now, not soon, but perhaps he enjoys a bachelor life Mon to Fri?