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Original poster

Sell.. Rent or Remortgage

73 replies

TeaPot40 · 06/05/2020 18:57

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

OP posts:

Iamthewombat · 09/05/2020 22:57

If the OP sells, rents and buys later she will also have a house at the end of the term, and more money.

That is because she has cleared the £40k debt that would have cost her at least another £40k in interest, had it been glued on to the debt secured on her house in a remortgage. Interest is the thing that ruins people’s wealth, although it works out nicely for the lenders.

emz771 · 09/05/2020 23:03

It’s an “if” though - we don’t know her age, how difficult it will be to get a mortgage in the coming years.

The reality is she has a house now and one that it seems has enough equity to clear her debt but still allows her to keep it.

For me it’s a no brainier.

Iamthewombat · 09/05/2020 23:19

No, we don’t know the OP’s age, but she does. She has also told us that after the debt is cleared she and her family can manage just fine financially.

I think we can take it as a given that the OP has done her basic research and understands lenders’ criteria. She will be a better candidate for a mortgage in future anyway, by having cleared the £40k debt.

emz771 · 09/05/2020 23:24

I don’t think we are going to agree on this.

fallfallfall · 09/05/2020 23:30

i don't find that level of debt high at all.
how much are you able to pay down each month?
even at 1.5K a month down it will be gone in 3-4 years max.
do you like the house?

strawberry2017 · 09/05/2020 23:31

The options aren't great. I think I'd be very reluctant to sell my home, mainly because I don't think I'd ever be in a position to save for a deposit again.
I think this needs actual financial advice from a professional not a bunch of random people on Mumsnet.
For the debt you have it's too much of a big decision get it wrong.

maxelly · 09/05/2020 23:35

I don't understand OP when you say if you sold up and used the equity to pay off debts, you'd be left with just the mortgage which you'd be able to pay, what do you mean? If you have sold up there is no mortgage to pay, and if you've used up all the equity paying off the debt how will you get back on the property ladder - 100% mortgages don't exist anymore and even 90% ones are quite hard to get, so you'd need at least a 10% deposit?

Selling up and renting is not usually a great idea, not because renting is bad per se, but because there are inherent costs of selling which are just immediately lost - estate agents commission, legal fees and so on. If you were then wanting to buy somewhere new a few years down the line, you then have more legal costs, stamp duty etc.

It would help to know roughly the size of the debt, the value of your current property and how much equity you have. Have you looked into remortgaging for the amount you would need and what interest rate you would get? Are you currently on a fixed term rate and do you have any early repayment charges?

Iamthewombat · 09/05/2020 23:45

The OP has told us how much she owes: £40k. She has £50k equity in the house. The value of her house is irrelevant. She has also told us that under normal circumstances her family manage fine financially, so they could save a deposit for a new house in the future.

My initial suggestion was to consolidate the debts in a single loan not secured on the property and to pay it down ASAP, but the OP has said, not unreasonably, that the debt is preying on her mind and she just wants rid of it. If she’s not especially wedded to her current house, why shouldn’t she sell it and make a fresh start? The costs of selling are a consideration, but are not high enough to make the sell option unworkable.

In the OP’s shoes I might sell my house. I absolutely would not remortgage and add the debt to a loan secured on the house, for reasons I’ve explained several times.

emz771 · 09/05/2020 23:49

We also don’t know the value of the house. If she lives down South it’s realistic that her stamp duty when she buys again could be 40/50k.

Iamthewombat · 10/05/2020 00:07

The OP would have to be spending £1m on a house to incur £43k in stamp duty. If her family could service a mortgage for anywhere near £1m she wouldn’t be stressing about a £40k debt, would she?

emz771 · 10/05/2020 00:08

I’m not sure on personal circumstances - but my point stands.

Iamthewombat · 10/05/2020 00:13

No, your point doesn’t stand, I’m afraid.

You are starting from a position of (1) believing that anybody who owns a house must hang on to it at all costs, including the not inconsiderable cost of paying a £40k debt over 25 years, the lack of logic of which appears to be lost on you and (2) using illogical arguments - renting is a bad investment! She might be buying a £1m house! - to back up your argument, which is founded on a lack of understanding of how loans and interest work.

emz771 · 10/05/2020 00:15

Renting is a bad investment - there is almost no counter argument to that.

NeedToKnow101 · 10/05/2020 00:20

I'd get advice from a debt charity and hang on to your house. Renting usually costs more than a mortgage anyway, and you'll have to save up for another deposit for a new property, and all the other costs it entails. Banks won't be keen to lend without a large deposit, plus your house may lose value temporarily because of covid, so not a good time to sell.

ArriettyJones · 10/05/2020 00:20

Never sell up and go back to renting unless there are truly exceptional circumstances.

If remortgage would clear debts and leave you able to afford repayments, I can’t really see why you wouldn’t just do that.

Methtones · 10/05/2020 00:23

Renting is a bad investment - there is almost no counter argument to that.

Because rent is not an investment. It's a cost.

Iamthewombat · 10/05/2020 00:23

For the second time, paying rent is not ‘an investment’. Paying your mortgage is not ‘an investment’. I can explain why to you again, if you like, or you could just read the previous page again.

What else do you consider to be ‘an investment’? Getting your nails done? Paying the gas bill? Doing the weekly shop at Tesco? Buying a bag of chips?

A range of books on basic financial literacy is available. For you, one of those might be considered an investment.

emz771 · 10/05/2020 00:24

I’m good for the books - but thanks for the offer. Buying a house and having a mortgage absolutely is an investment.

Iamthewombat · 10/05/2020 00:32

If remortgage would clear debts and leave you able to afford repayments, I can’t really see why you wouldn’t just do that.

Because it will cost tons more to repay the debt over 25 years. That is why. The OP could take out a separate loan, not secured on the house, and aim to pay it off over 4-5 years.

Having seen the lack of basic financial sense on this thread, I think I will chuck in my job as an accountant and open a loan company.

My adverts will be fronted by somebody holding a calculator and wearing a t shirt saying, “I can do maths and that is why you should believe everything I say. I wouldn’t lie to you or try to rip you off”.

The maths person would point to a big sign saying 3% and another saying 9% and say, “what would you rather pay? It’s a no brainier (sic) innit?”

The small print at the bottom of the screen will refer to a set of Ts and Cs. Which might tell you that borrowing at 9% over 5 years will cost you a lot less than borrowing at 3% over 25 years. But who cares about that, eh? It’s a no brainier (sic) and an investment!

emz771 · 10/05/2020 00:34

It would cost more - nobody from what I can see is arguing that. But over 25 years the monthly payment would be minimal and OP would still own a house.

Sell up and she might not get back on the ladder again.

maxelly · 10/05/2020 00:37

I get your point Iam, but she wouldn't necessarily have to repay the £40k over the full 25 years, would she? It's possible to overpay most mortgages (although again we'd need to know the size of the mortgage to know if this is feasible, on a £100k mortgage maybe not but on a £400k mortgage would likely be OK), or to get a fixed deal ending in say 2-5 years, at which point you remortgage again for the remaining amount, less the £40k which OP has now saved up to repay?

And yes, £40k stamp duty is an exaggeration but £2.5k stamp duty on a very average £250k house, plus let's say EA commission of £3750 on the sale (1.5% -pretty reasonable I think), plus legal fees of £1000 each for both the sale and mortgage, and 2 lots of moving fees of £500 each, OP is not too far off having spent the best part of £10k on selling up, renting for a few years and rebuying, or 25% of her existing debt. That's before we get into any arguments about the absolute costs of renting vs paying off a mortgage, which gives more peace of mind etc etc. Renting might still be the best option of course, I am not denying that, but unless OP is paying an absolutely sky high interest rate it might end up costing more in plain terms than just staying put and paying off the debt over a few years, whether that's via a loan or a remortgage, if this is an option, surely?

Iamthewombat · 10/05/2020 00:43

Sell up and she might not get back on the ladder again.

And you know this how? Do you have an insight into the future of the housing market? Do share.

But seriously (because I know that you don’t have any such insight), your posts demonstrate a particular type of bad financial sense demonstrated most often by women. It’s all about hanging on to a house at all costs. No matter how poor a financial decision it is to remortgage, you would do it in order to hang on to the house. You wouldn’t sell or take out a separate loan even if it put you in a better financial position long term.

You, and people like you, are sitting ducks for equity release salespeople. Why? Because you would make any stupid financial decision just to hang on to the house.

It is people like you, I suspect, who borrow too much to buy a house even when they are overpriced then complain that they can’t afford to save for a pension. Because the thing they care most about is...the house.

Women often end up with a bad deal after a divorce because they prefer not to take a share of their ex-husband’s pension in order to...you guessed it...hang on to the house.

It is easy to see where financial services people have made their money over the years. Easy pickings for them.

emz771 · 10/05/2020 00:45

You literally couldn’t be more wrong about me.

No insight into the future - hence why I used the word might.

Iamthewombat · 10/05/2020 00:46

Also, the concept of ‘the ladder’ still makes me laugh after all these years. Unless you expect to earn a much higher salary in future years, the house you are in now is the house you will remain in. No ‘ladder’, unless you happen to buy somewhere where prices rise a huge amount then move to a place where prices somehow haven’t followed the same trajectory. This happened in London in the nineties and early 2000s, but nobody should expect it to happen again.

Iamthewombat · 10/05/2020 00:47

You literally couldn’t be more wrong about me

So you’re pretending not to know anything about loans, interest and investments but really you’re an expert? Now you’ve got my attention.

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