I’m in deep shit and need sensible advice. I can’t see the woods for trees. I have assets but I’m deeply in debt. I would be grateful for advice on best course of action.

[Fecked]

Please be kind. I am in bits with stress. I know my assets might sound great on paper but reality is I’m losing £1k plus per month to debt right now, spiralling and the fear is making me majorly depressed which makes it hard to think or make decisions.

I keep having suicidal thoughts but wouldn’t act on them. The huge debt pressure and fear is making me ill though (I have chronic illness which worsens with stress and carries increased cancer risk- another stress!)

I own two properties, a house and a flat in nearby town. They are similar value. I live in house and the mortgage is reasonable and affordable. No capital gains if I sell.

The flat has a higher mortgage, a higher interest rate and the mortgage payments are almost double those of the one that I live in. Crushing CGT if I sell. It brings in some profit but not much bc landlords can no longer set interest payments against tax.

I have about £60k debt in overdrafts, loans and credit cards due to a specific major problem that occurred.

I eventually want to leave my home as kids have gone and I don’t like area. I really love the house but can’t cope with maintenance and garden- I work full time- very full on.

One idea I had was to sell now, pay all my debts and put profits into the flat, improving its loan to value, and remortgaging to a cheaper personal mortgage and living there. I’d have to renovate as it’s been rented for a long time. Living there would reduce the eventual CGT.

Another option is to sell home and put money into the flat but continue to let it. Then rent a smaller place, save increased profits from the flat.

Other option is to stay where I am to wait till house market is better, take second job and or a lodger, and keep on struggling. I find it hard to say goodbye to homes.

In current circs I can’t remortgage to pay debts but as interest rates improve I should be able to.

sensible take on my situation is much needed! Thanks!

Do you like the flat? Your long would you have to live there to reduce the CGT? It seems like a sensible idea to me to move there.

Also have you seen anyone about your anxiety? How old are you? I’m asking because sometimes peri/menopause can do crazy things to our mental health and you might be able to find a pharmacological solution as well s as a financial one.

MSE has a great forum with some really good help and advice on debits. Owning 2 homes seems to be a huge weight on your shoulders. Can or would you sell the house and live in the flat?. You say the CGT is massive on the flat but as the mortgage is double the house, taking the CGT into account, if you sold it does it leave you profit to clear some debts?.

Can you talk it through with a debt advice organisation? Make sure it's legit obviously.
The only other thing I'd say is if you need to reduce your stress levels then you'd be best quitting being a landlord. Good luck whatever you decide.

Definitely talk to a debt advice organisation - they should be able to prioritise things and help you make the right decisions. I hope you can sort out the debt and reduce your anxiety soon - good luck.

I think you know the answer but your stress is making you question yourself. Your first suggestion of selling the house and moving to the flat seems to solve most of your issues! I’d do that

Ok that's all your assets, what about your actual income? Outgoings? Is the reason for the debt ongoing or has it ended?

One idea I had was to sell now, pay all my debts and put profits into the flat, improving its loan to value, and remortgaging to a cheaper personal mortgage and living there. I’d have to renovate as it’s been rented for a long time. Living there would reduce the eventual CGT.

This sounds very sensible to me!

£1k a month is a lot to be losing to debt.

Secondly, with regs to CGT, have you calculated it on the total amount or just the amount above the original purchase price of the flat? Because only the gain is taxable (e.g. the sale price minus the purchase price) so you would always get the initial puchase price back. Here's the CGT calculator if this helps you, I ran a hypothetical and a £200000 flat that was bought for £100000 would only pay £17k in CGT assuming average costs buying/selling it and about £10k spent on improvements since date of purchase:
https://www.gov.uk/tax-sell-property/work-out-your-gain

I can't work out how you'd be better off moving into the flat rather than selling it or selling the main house and downsizing to another flat and continuing to rent this one out; if you rent the house out and move into the flat, you could end up paying CGT on 2 properties because it depends on how long you lived in them (or the percentage of time they were rented out, actually, as far as I understand it).

Also I'm sorry to say you probably won't be able to get a personal mortgage on the flat with that much debt unless you have a very high income and a way to repay the debt. You won't pass affordability.

What equity do they each have? and what's your income? and is the size of the debt now contained (other than the interest payments)?

Can you give figures? Income, mortgages, amount you get from the let flat, interest being paid on the debts, is your debt increasing or decreasing each month?

So the great news is that you have assets, and no dependents. You have options. And a great plan already to both reduce eventual CGT and get rid of your debts by selling the house and moving into the flat.

Yes, debt is stressful but this is not an emergency (unless you can’t pay your bills, but that doesn’t sound as if it’s the case?)

Couple of questions:

Without the debt can you cover your living costs?

How old are you/how far from retirement? (For mortgage purposes).

How much equity in the house if you sold now? How much do you need to renovate the flat?

If I were you I’d stop, take a breath, and then just make a list of next actions e.g.

1. Get estate agents round to value putting house on market.
2. Call credit card with highest interest and ask for breathing space. Repeat with others.

Then go from there.

I'd sell the flat, that way you'd lose the large mortgage along with a lot of your stress. I realise CGT would be high but you can offset any improvements you have done to flat eg. new kitchen, new bathroom once. If the CGT would be high the profit would also be high. I'd use profit to repay debt and have a fresh start without the constant worry. I'm a LL myself so understand all the admin involved. At a later date once debt gone and you are less stressed you could consider selling your home to downsize to something smaller, maybe a bungalow, or in a lovely location eg close to a beach.

Is the debt actually increasing? Or can you actually pay your debts on a monthly basis?

Because selling the flat is going to include some void periods, which you possibly can't afford. And likewise moving into the flat may well include some voids.

If you can live on your income, and pay your debts, can you snowball the debt?

Have you actually calculated the CGT? It’a probably a maximum of 28% of the profit on the flat. And you can offset various things off it.

I get it that nearly 30% of your profit is a lot to lose, but you get to keep more than 70% of the equity you've built up. if you describe the tax as crushing, then I assume there’s a decent amount of profit there. Presumably you could use that to pay off your debts, and then at some point in the future downsize your house.

Alternatively, selling your house and moving into the flat seems like a good option too if you’re happy to live in the flat.

Never re mortgage to pay debts. You are making an unsecured debt secured.

I would post this on Money Saving Expert Debt Free Wanabe forum.

You’re thinking wrong about this. Any profit you would make on selling the flat is a gain. Profit is what’s left after everything associated with the sale is paid - including any CGT. You’re not ‘losing profit’, you’re acquiring a smaller profit.

Similar case I am putting two into air b and b from rentals offset all your costs if you have a nice area of area where business is.

It seems like there's two issues here
One is that you are already £60k in debt, the other is that your outgoings are £1k greater the your income so the debt is rising.

Selling a property would presumably help you pay down some or all of your existing debt but would it also bring your outgoings in line with your income?

See a financial advisor they are fab at offering sound advice

Thank you so much everyone for replying. I can’t tell you how much I appreciate your supportive answers. I’ve been out for a family celebration hence slow reply. My head is a little muzzy now as a result! I will reply properly in the morning. Thanks again

Landlord CAN offset the interest payments against profit but now in the form of a 20% tax credit ( just not against the whole 40% tax )
Id sell the flat, pay any CGT and pay off your debts. Living in the flat wont reduce CGT, as its based on the total profit made as a % of how many months you've lived in it. You wont "convert" any of those non lived in months. So if you owned it for 100 months and lived in it 20 months, 80% of the profit is subject to CGT less offsets and annual allowance again as a %

@Fecked
Sell both properties, clear your debts and then buy something smaller and more affordable to maintain for yourself to live in

Thanks so much for your replies. I’ve read and thought through each one. My plan has taken shape to some extent:

Selling my home will give me a large CGT free sum that will clear my debts and pay a good chunk of the mortgage on the flat. I will then live in the flat to renovate, bringing it up to standard of its area.

Then I will see how affordable it would be to continue there- I want my kids to still have a base as they are at uni still. The flat has space for that and is also near lots of my friends and in an area I like.

Once the kids have their own places, I will sell and move into a smaller place. That is the idea that has solidified after reading the various replies. But I will take advice from a financial advisor and have signed up with step change.

my income would be sufficient to cover my outgoings if I didn’t have the debts, but I am spiralling by £1k per month debt payments which is why I have to take this drastic action. Selling the flat with its current high mortgage and CGT implication would not bring the same financial advantage as selling my home. But I can increase the flat’s value with renovation once in it.

until I sell I may have to ask family to help me with a tiding over loan to settle my tax bill, and take an extra job to help with the monthly losses. It will be tiring but hopefully not long term.

this is the place I’ve got to. I’m feeling a less terrified having made a plan. I want to move to the town long term anyway but it does make me sad to be selling my home. But I think it’s necessary and fits with my long term plans.

sorry for rambling on! It’s really helped me to think more rationally. Thanks again for taking time to reply and your kindness!

@MustBeGinOclock do you know the best way of finding a reputable financial adviser? Thanks

Wow. That’s the loosest definition of “deep shit” I’ve ever heard