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?

It’s it the OP (but it was a long one)

Agree that if family is important to you it is reasonable to go to Barcelona to support your sister. I’m still not clear what your loans are actually for - on page 2 you mention using savings for boiler and when DH took unpaid leave. So is this in fact a pattern of consistently spending more than you earn? Agree there are lots of things not included in your spending breakdown like clothes for you all, toys, books family days out.
My kids always had school shoes, another pair and trainers and wellies when younger. My BILs kids have around 10 pairs each at anyone time plus the wellies and trainers - where are you on that scale? This sort of nice to have but definitely not essential spending soon adds up.

@wheredidallthemoneygo Wow, you have been through a lot of stress and life changes in the past few years. Take your time and assess your situation. We have had some major life changes and at times it feels like we are hemorrhaging money and sometimes we have to ride it out and other times we have had to shut the doors and hang on for dear life!

If you can look at your options and what your future looks like, maybe that would help.
Can you afford to live so far from both jobs as it is costing you somewhere in the region of £7k a year.
Can you afford private school for two children on a combined salary of around £100k per year? Currently costing you £3,600 but this will rise significantly.

What are your priorities? Private schooling, jobs that are costing you to travel to? House?

It also helps to look at how you got to where you are. You used savings to fund your house repairs which could have possibly been added to your mortgage so don't rule out doing that retrospectively.

Your husband was unpaid for 6 months, this amounts to roughly 2/3 of your credit card / loan debt.

If you knew then what you know now, how would you fund that? Would a medium term loan to consolidate your debts and spread them over a longer time make sense? You might be able to get a 5 year loan reduce your repayments significantly.

In the medium term, the fact that you are paying for a 4 bedroom house and a flat share which you will never own for jobs and house location that don't fit anyones needs is an issue.

In the longer term, school fees is your biggest cloud on the horizon so you need to factor that in to your future proof budget.

Good luck unpicking it all and I hope uh find some breathing space soon.

You both have good incomes. From the discussion so far, lots of fairly 'easy' savings to be made in your budget.

Get the two loans paid off and things will be better.

Don't sell your house to pay unsecured debt. As long as you are at least paying interest you are fine. Go to Money Saving Expert and follow the basic guidance there, focus on paying off balances that incur interest and leave the 0% stuff last.

Even if you end up with a few credit card payment defaults and so on. this will hurt your credit rating, but if you remortgage onto another fixed rate mortgage with your current provider you won't get a credit check so who cares.

It might take some time to get on top of the debts but each one you pay off will improve the situation. Childcare will get cheaper as DC get older and are at school for most of the day etc.

I would keep your house. You don't seem very good with money and living within your means. There are savings to be made in your budget as outlined by pp. I think if you downsize to pay off your debts you may well find yourself in the same situation a couple of years down the line, unless you change your mind set.

In the minority here, but I think downsize and move to a smaller property, pay off all your debts and then live in your means. I always say, it's the love and who's in the house that matters. I've seem many people stretch themselves for a house and have become 'house poor' it never makes them happy. OP, I completely understand about your sisters hen party. I really wish all these expensive hen parties would stop, it would be gutting for you and could possibly cause a bridge between you and your sister if you dont go...xx

See if work will help with the child are costs if they are incurred because of a work related course? Also look into a Mon to Fri lodger. I had a lovely lady with me for a year and it took the financial pressure off immensely.