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?

To those saying I should live with in my means, I agree completely. Generally we have been quite good with money, we had a good pot of savings and only used our credit cards for bigger purchases that were paid off over a few months. We've never been in debt before and I think what has freaked me out a bit is how easily it is has built up. So we bought the house, and used some of our savings to do some essential work to it, fully intending to start building the pot back up. But then I discovered I was pregnant after about 2 months in the house - totally unplanned. We started saving up for maternity leave, then our boiler packed in and needed replacing so that was more money out, plus all the baby things we needed. Then my mum, who provided 3 days childcare for my eldest had a stroke so we had to start paying extra for after school care.I planned to have 6 months mat leave (12 weeks full pay then statutory), but after about 4 months my FIL became terminally ill and went into a hospice. FIL lives a flight away so DH went over to be with him, and ended up being there for 4 months on unpaid leave until he passed away. I went back to work part time during this period but it is a long time to be without both of our full salaries, and couldn't have come at a worse time as we had depleted our savings for the house. I think I resent this house a bit for being such a money pit! My intention is not to move and squander our money on all the nice things, but to move and have a less stressful, less restrictive lifestyle whilst also being able to build up our savings again. I get what you are all saying about living a frugal lifestyle for a couple of years, but with everything that has happened, I'm terrified that something else is going to crop up in the meantime that will push us over the edge!

Try this:
Step forward 2 years, all debts cleared, mortgage as it is now, buying decent groceries, an allowance for fun stuff, saving a bit , kids clothes etc - in other words the lifestyle you'd like to have. Does your income cover it?
If the answer is 'yes' then this is a temporary, if very stressful, situation caused by a series of unprecedented events all clumped together (which would make anyone feel vulnerable even if money worries weren't lumped in top).

If the answer is 'no' then your income doesn't support your desired lifestyle and maybe downsizing might not be a bad idea.

In other words, make a long term decision, not a panicked short term one that you might regret.

Have you considered moving costs? Are you planning more children? Can you WFH to cut your petrol costs?

I'd look at state schools for sure. Especially if you want another child.

You've had a run of bad luck however moving is going to cost a lot. Your mortgage isn't a huge outgoing compared to your salary. If you moved and cut your mortgage to £600 that's £300 extra per month which you will have soon anyway.

Lightly poached advice is good but ask yourself this first in 2 years time of money were no object would you still be in the house because I’m not sure you like it. I know your DH does but do you

Go to money saving expert forum for advice
Do not reportage as its bad advice to turn unsecured debt into secured debt
Selling your house will incur costs and you may struggle to get a new mortgage
Pay priority debt first you may need to enter a debt management plan ...avoid fee charging companies talk to step change
But firstly look at your budget and track your spending

Have you thought of saving a small sum with a local credit union , they will often lend smaller sums of money so you don't always need to use the credit card .
look on the debt free diaries on MSE for inspiration . Sometimes people just sell a couple of small items for a couple of pounds or so (ie childrens clothes /toys etc) and pay it off the credit card balance, every little helps. If you look on the frugal blogs you might be able to save a little bit on the food shop .

I am very sorry about FIL but your DH clearly couldn't afford to take 4 months unpaid leave when he had a wife and child to support.

You (as a couple) have made some strange choices.

The private school thing in particular, as if a private school with a breakfast club is the best value childcare option!

Hi,

I'm just coming out of a similar situation.
House worth £175 with a £125 mortgage and £30k in debt. We pay £500 a month on mortgage and £1000 in other debts, credit cards and loans etc.
The extra cost of moving we felt would just add to our problem, so chose to remortgage. £25k extra into mortgage it's cost £500 in fees. We'll be £700 a month better off. Definitely worth considering remortgaging over moving when you have so much equity!

So currently you have hardly any disposable income, but in a couple of months, when the first loan is paid off, it will increase by £300 pm, which will feel massively easier and then again, in 8 months, ie later this year, another loan is paid off, so another big jump in your disposable income/amount available to pay off debt, save and live a little, although more money should be directed towards getting out of debt and building some savings.

There is light at the end of the tunnel and in your case, I don't think it's necessary to sell up to pay your debts off, rather sit tight and concentrate on reducing costs especially interest rates on the credit card debt.

Throw as much as you can at the credit cards and make sure you're always on an interest free deal and if one gets near the end, while you still have a balance, apply for another one, or see what offers are available on any unused cards you have.

As far as future 'emergencies' go, as long as you get all your credit cards onto 0% deals, you could start to build up some savings to be used for genuine emergencies like car or boiler repairs etc.

I know you say you have done things like cancel sky, but there's often more savings to be made, so the Moneysavingexpert money make over gives a systematic list of things to look at. Also sign up to the weekly email for ongoing tips about how to get extra money (eg switch your bank account) or cut costs.

www.moneysavingexpert.com/family/money-help/

On the other hand, you are using so much petrol that suggests that you live too far from your work so is there any way to change this? Move closer to work, work from home some days, get a job closer to home?

Your DHs car sounds like it is expensive to run in terms of tax, insurance and possibly fuel. Could he change it to a smaller, cheaper car? Some older cars have low insurance groups and £0-30 per year tax, plus lower fuel costs than a BMW saloon.

Is there any way you could reduce your oil costs? The price fluctuates seasonally I believe and sometimes communities run 'oil clubs' where they use group buying power to get the best price by going to the available suppliers and saying 'if we all buy our oil from you and take delivery on the same day what is your best price' and play them off against each other.

I get what you are all saying about living a frugal lifestyle for a couple of years

I don't think you do.
For example, putting a child in state school isn't frugal, it's what the vast majority of people do unless they can actually afford private school fees.

Your house isn't actually that expensive. Where we live (not even London) you would barely get a 3 bed house for that. The issue really is about some of your choices (I don't understand the 4 months unpaid leave to look after FIL leaving a wife and child behind but perhaps there truly was no alternative?).

Please go and talk to someone like CAP to help work out some sensible choices.

Definitely worth considering remortgaging over moving when you have so much equity

But with remortgaging like that, you're swapping short term unsecured debt for long term secured debt. Yes, the interest rate might be cheaper, but if you pay over long term, it could cost a lot more, especially if they could just go through a few 0% credit card offers instead. The OP is also in a deal, so remortgaging will cost her in terms of early repayment charges.

Plus they'll have a bigger mortgage to keep up with, so larger risk of losing their house if they lose their income for example. And a significant proportion of people who remortgage to 'pay off debt' continue to overspend and end up with more credit card debt and a bigger mortgage as well, because they haven't addressed the overspending issues that got them into debt in the first place. It's rarely a good idea to do this, and for it to work, you really need to have a serious look at your budget and spending and put money into savings to cover irregular expenses that will crop up sooner or later, like car or household repairs.

OP, you're also missing some things in your budget like children's clothes, dental costs, prescriptions/opticians if relevant, car and household repairs, Christmas, water, home insurance and probably other things, so another look at your budget is essential to make sure everything is included.

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

I really don't think this is good advice, firstly you shouldn't tell your employer anything and secondly an employer isn't responsible for the outside work costs of their employees.

I suppose a very generous employer if asked nicely might make a contribution but I can't see any setting that kind of precedent, they'd be crazy to do that.

The work place didn't make you have children so it isn't really a cost they have to pay. That's a crazy mindset. Besides, that's what you get a salary for -to cover your cost of living.

I wouldn’t sell the house, that’s insanity in the long term...

But I do think that to get yourselves out of this hole for good, and prevent falling in another one, both you and DH have to look at your lifestyles. You can’t afford Barcelona, and you could have done something cheaper with your sister. I appreciate that you want to go, but it’s a hen night... they’re not that important. It sucks to miss out, but it would have reduced pressure. And your husband couldn’t afford 4 months away. You both have children and responsibilities.

Your ideas of frugal living seem off, and I wonder if rebalancing those would help you to both make better decisions and feel less hard done by.

Don't cancel Barcelona. It's a very special occasion. Make it your last big treat until debts paid off. Stick it out for next six months and review then. Sounds like you will be in a much better position in six months time.

If you have to go on a compulsory work event that costs more in childcare they should pay

Would you be happy with your house and lifestyle if you didn’t have debts? If yes then don’t consider moving. Moving is a whole other upheaval and will incur you costs in the short term which you can’t pay and will get you more debt. It just seems like an easy solution because of your equity.

I’d suggest a personal loan split between you and your DH that you can pay off early once you have more monthly income. 10k over 6 years would cost c160 per month.

Do you bank online and have an app? Check your app for loan options. If you have a loan alongside your current account Then any spare money in your current account can be transferred to your loan account and it’ll be there in front of you when you open your banking app.

I understand how debt can mount but you do have to take back control.

The private school does seem a little expensive if you are just getting 1.5 hours of childcare in the mornings
I have a friend who does wrap around care and she charges £5.50 per hour per child. Parents drop at her house from 7am and she takes them to school and picks up in the evening and parents collect up to 7.30pm

I would look around at stars primary schools and early morning/wrap around care and maybe look at private in secondary school.

Is the childcare for another child who is pre school?
If it is that will also end in a few years.

If you sell you are making a drastic solution to a temporary problem.

Ultimately you need to move closer to your dhs work but in the meantime start to make inroads into the debt. Once you get rid of that first loan then things will start moving

I write down in a ledger how much we owe on everything, what the monthly payments are and when it has been paid. I carry forward the amount owing to the next page.

I can see exactly how much at a glance we owe from month to month and whether that figure is going down or up

I don’t know if it is still on MSE. There used to be a spreadsheet of what you spent your money on. It listed everything from mortgage and rent to newspapers and coffee.
I think you are missing a few things from your list.

Even doing the weekly food shop. Making sure you use Aldi or Lidl as opposed to Sainsbury’s or Tesco. Making a list of exactly what you are planning on cooking and sticking to it down to the exact number of carrots. Using up your freezer food etc

Little or no alcohol. Vegetarian or Vegan a few nights per week.

Ultimately whilst you have had a few larger bills most of which were paid by raiding your savings and your dh was off work for a few months and you were pregnant on maternity leave I still don’t believe that would account for the number of loans and credit cards with monthly repayments of £1675 per month.

Should have said because otherwise it discriminates against women who are more likely to have childcare costs

Should have said because otherwise it discriminates against women who are more likely to have childcare costs

I'd be interested to know the legal position on this, would you expect an employer to pay for other non child caring responsibilities, for care of pets for non refundable tickets for an event while you were away?

I don't know the answer but if employers are expected to pay for childcare it's another reason that they would be less likely to hire a women with children imo rather being discrimination against women already in employment. I know it could apply to men too but in practice this is very much less likely.

Sit it out. My friends sold her house for the same reason and is still renting 10 years down the line. No hope of ever owning another property.

@FeedMeChoc but OP isn’t talking about renting, so that’s a different situation.

Ah I didn’t read all of the updates before posting.

Why don’t you just go and look at your 2 or 3 local state schools? We moved to a new area when our daughters were in reception and year 3, totally new town. I panicked they’d be so upset and yes they were with leaving their old school but by the end of the week in new school (all state btw) I had a girl back for tea! Both breezed it. I then moved my fourth child to start a new school in year 3 as he hadn’t got into the school the others were in and then got a place so a more local move. Again, he absolutely breezed it. I wouldn’t have ever believed it was so easy. I’m imagining yours is still young?? Anything before year 3/4 is really not as big as you think. If you also took out a loan over 5 years to clear all the outstanding credit cards and existing loan of say £30,000 that’s about £550-£600 per month and with the school fees savings I think you’d be nearly 1.5k better off a month.