Sell.. Rent or Remortgage

[TeaPot40]

We have some large debts and we were planning on selling and renting for a while to clear the debts and then move forwards
However I worry that renting is risky now and it'd be better to remortgage. The equity in the house would pretty much clear all our debt and we'd be left with just the mortgage.
Its going round and round constantly day and night in my head and just need some other perspectives..
We got shat on massively which is why we have the debt and once it's gone we can afford all bills comfortably and lI've within our means.
It has just spiralled a bit
Thanks

I would never sell my house if I could afford not to.

Why is renting riskier? It's no riskier now than other times.
If you can hold in to your property do so. You probably won't be able to remortgage if your finances have changed dramatically.
Have you got a plan in place in terms of repaying other than by selling?

If we can clear the debt with the equity then we have no problem paying the mortgage and all other bills.

Bump

Contact a proper financial advisor. Or talk to your bank. Get some proper advice before you take a big financial decision.

How much are your debts? Are they a mix of credit card, loans and store cards? Can you switch your credit card debt to zero % credit cards

Go through your outgoings, cut down on unnecessary expenses, switch to better deals for utilities etc and trim where you can. Then use the savings to overpay on the highest % debt first.

I would only look to releasing equity from your house if you can't clear it within a few years by yourself. You are going to have to live frugally for a bit to clear the debts. Don't sell your house to do this, your house is your asset and it will be hard to get back on the ladder later. Have a look at the CAP website, they give very good independent debt advice.

capuk.org/

Given the choice (which you have) I'd never give up my home.

Regardless of anything else, renting is always riskier

If you rent, you are simply paying off someone else’s mortgage for them. I wouldn’t sell my house if there was any other way of repaying my debts, which it sounds like there is. Maybe get advice from somewhere like stepchange.org or some other debt-advice body.

But if you clear your debt with the equity then you will have no deposit?

Banks are restricting lending now and will continue to do so. Depending on your LTV i would really not consider this a option

It's a mix of credit cards and loans..
All cards are 0%
We were fine until 3 years ago when we were truly screwed over and we just want to be ok again. We have never been in this position before.. it's making me ill
We are going to get advice and won't make any choice lightly. Debt all in is around £40000 and equity is nearer to £50000
Once the debt is gone we will be more than able to manage with the money we earn and we are not big spenders at all

Hi there, @TeaPot40 - we've moved your thread over to Money Matters now. Hope that helps.

Crikey! That amount is scary. I appreciate you don't want to give details, I'm not asking, just want to send an e-hug. To have been screwed out of that amount, no matter how, must be utterly sould destroying.

I can only add that stepping off the housing ladder is not always the worst thing you can do. We did for about 20 years, both went to university, and rented until we could afford to buy again. So it can be done. You haven't failed at anything if that ends up being best for you

Most best advice will look at the sustainability of any repayment scheme, including your standard of living and protecting your credit score.

If you haven't already make a breakdown of how much you can afford to repay over how long and how that will affect your standard of life.

All decisions will stem from that.

Good luck getting it sorted

If you rent, you are simply paying off someone else’s mortgage for them.

Not this old chestnut again. No, when you rent you are paying for somewhere to live. Do you think that rents should be free? Or that people who actually want to rent rather than buy should be made to take out a mortgage because you know what’s better for them?

OP, remortgaging to clear debts usually costs more in the long run because you’re paying off the debt over a longer period. Say you add a credit card balance of £10k to a 25 year mortgage term. The headline mortgage rate may be lower but thanks to compound interest working in the lender’s favour, you end up paying loads more interest.

You might think, it’s worth it for short term relief but the extra interest you pay to the lender could have been used to pay towards a pension or savings.

That is why you see so many adverts - including those featuring the awful Carol Vorderman to make you think ‘oh yeah, she can do maths’ - exhorting people with debts to convert them into a loan secured on their homes at a lower headline rate. The lenders can’t lose: you keep on paying and paying, they more than double their money and if you default, they take the house.

I’d investigate a PP’s suggestion of shifting credit card balances on to 0% cards.

You say that you were ‘screwed over’ which suggests that this is debt arising from a business. Provided you can afford your current house and lifestyle under normal circumstances I’d stay put and consolidate the debt into a loan that isn’t secured on your house, that you can work towards paying off in as short a period as possible. Good luck.

Being debt free is literally all I can think about and selling our house will mean that we are..
I just feel that all the pros and cons are on a loop in my head and we'll sit and get advice and hopefully we can decide on the best plan.
For us there is a massive element of drawing a line and moving on in every sense which selling up will allow us to do.
I'm so sick of being worried about this so appreciate any points of view

Selling your house is a quick fix, and it’s actually not the worst idea, as @Curiousaboutsamphire said upthread. It clears the debt quickly, it will draw a line under the events leading to the debt, and it’s a much better solution financially than remortgaging.

Unlike many, I don’t see that moving into a rented house, and buying again later, is such a terrible thing. There is a lot to be said for clearing the decks and making a fresh start.

So many variables. If it was me I would try to re-negotiate mortgage and extend to make it attainable rather than sell up. There's nothing wrong with renting, but if you can keep your home that is a better option. However, if you are in an area where you could save up a downpayment again within a reasonable time, and the debts are causing a level of anxiety that aren't healthy, then it could be a good idea too.

Start by seeing at least 2 banks and see what is the best mortgage they could offer you. Look at whether that could work.You may have a good option ahead.

I agree that you should get some proper, independent advice because I think you may be rushing into this without thinking about what may happen if things spiral again. I can absolutely understand the urge to be debt-free, but I would really take a long-term view on this. You sound a bit panicked (understandably) so don't make any rushed decisions. Especially if the debt is on interest-free cards, moving it all to a mortgage would be more expensive in the long run surely? Wishing you all the best with your decision, whatever it may be.

If you can - then remortgage. Renting is rarely a good option.

If you can - then remortgage

For the love of god! Don’t remortgage. It will cost a mint over the term and put the OP’s home at risk. I can see now how banks and loan companies make their money from people who don’t understand how interest works.

Renting is rarely a good option.

Renting is often a very good option. I’m waiting for someone to parrot, ‘but renting is dead money!’

It’s not dead money per se - because you are getting a product/service for monies paid - but it certainly isn’t a good investment.

Renting is not ‘an investment’: you are paying for somewhere to live. In the same way as food shopping is not ‘an investment’ because you are similarly paying to satisfy a basic human need.

Here’s what a bad ‘investment’ looks like: deciding to remortgage and spread the repayment of a £40k loan over a 25 year mortgage instead of paying it down as quickly as possible.

If the OP sells and moves into rented accommodation she cancels the debt immediately with her profit. No more interest. Then she saves a deposit and off she goes with a new mortgage.

She may choose to sell, or she may not, but there are some good arguments for doing so, and those arguments are not based on a misunderstanding of how interest works, or what an investment is.

OP, with the downfall in the economy, you may not now actually have as much equity in your house as you think. If house prices drop by 10% and yours is worth £250k, with a £200k mortgage, it may now only be worth £225, reducing your equity to £25k.
Also, when you remortgage, you will have to complete the financial viability part, and as you have £40k in debts this will be taken into account.
You need to speak to a good financial advisor before you make any decisions.

I disagree.

I disagree.

You don’t even understand what you are disagreeing with. Never mind. Disagree away. Financial services businesses love people like you.

Sorry I should have said I disagree it would be a bad idea spreading the loan over 25 years. Sure you are going to pay more - but at the end of it you have a house.