Would we be better off selling our house and renting?

[mummytopebs]

We are struggling at the minute with mortgage payments as we have a large loan and visa cards, we have now budgeted so that we are not gettin in anymore debt, but it is going to take years to pay off all our debt.

With the way things are at the minute if our child tax credit or child benefit got cut we would be in the red every month acrewing more debt. I have just been looking at houses to rent in our area, and the amount we pay for our mortgage we could get a bigger house than we live in now!! I am wondering if it would be a bad mood to sell our house (therefore giving us some equity to pay off debt), and just rent. Also if anything was to happen ie redundancy etc we would get help towards rent but not if we own the house.

Has anyone else done this? WWYD?

By and large it's better to own than to rent. Reason being that your payments are contributing to an asset that, at some point in the future, you can sell if necessary. You could move to a smaller property whereas renting has many pitfalls. Should mortgage interest rates go up, for example, landlords can jack up the rent to cover the cost. Landlords often wish to sell their property to raise capital... and then you have to exit sharpish and find somewhere new to live - very stressful

Unless you've got a family income of £50k+ it's unlikely CTC and/or CB will be cut in the near future. And if you're genuinely concerned that there could be redundancy in the offing then you can take out mortgage protection insurance as a precaution. Mortgage lenders are obliged these days to give people a lot of options before they get to the stage of reposession.

I was once given the following advice 'Live on cold baked beans and read by candlelight but pay the mortgage'. i.e. pay the mortgage as priority and do your best to raise revenue, reduce costs elsewhere and get your other debts down. It was the best advice I've ever been given.

Agree with Chil, but also very surprised that your mortgage payments are higher than rental prices.
Can you rearrange you finances, interest rates (for savers) are lower than inflation at the moment and if you get off the housing ladder now you will struggle to get back on.

I'd suggest having a word with your mortgage lender and seeing if there's anything you can do short-term to bring down payments (payment holiday, extend term of the mortgage, change mortgage product) and give you a little breathing space to make progress with other debts.

Another option is to remortgage your property with another lender so that you're getting a better deal. Sometimes this isn't possible i.e. if you're tied into a fixed rate with penalty clauses or if you're saddled with a particular lender because you have a poor credit rating or you're self-employed.

Lots you can do before you cash in.

I would sell up and rent. pay the debts and save as much as you can for a rainy day. better now than repossession looming.

We have friends who have done exactly this and do not regret a thing.

They had quite a lot of debt and used the capital in their property to pay it all off and buy a (much needed) new car (not brand new).

They now live in a lovely cottage which is part of an estate so it's a long term let. They can paint/put up shelves/pictures whatever really and they are allowed to have pets. They have a lovely garden and a gardener is included in their rent

Rents in our area are very reasonable so this works for them.

They are so much more relaxed now they are not constantly worrying how to pay the mortgage!

The only thing which would worry me is what happens after you retire? But then these particular friends were faced with switching their mortgage to interest-only just to be able to make ends meet which would have had the same outcome.

If you can rent and put more money into your pension that would be great.

Or, as an alternative, could you sell your house to free up a little cash but use some as a deposit on a one bed flat and rent it out??

Good luck.

Remember - people in this country are slightly obsessed with owning their own property!!! If you're not going to be able to pay off your mortgage until you're 80 - what's the point??!

Could you switch to an interest only mortgage if things got really tight? Then rent out your house to cover the interest free mortgage and then rent a house yourselves? A bit complicated I know but you'd get to keep your property until your finances sort out a bit. Our mortgage is high as well so we scrape by but i've looked into ways of getting around the big payments should we get into dire straits.

We did this and it really was a good move for us.

We paid off debts and rented a bigger house (so promptly had another baby!) We have our dog here, and it's an area we love. We're lucky in that we have a brilliant landlord. For example, the bath has sprung a leak this week. If we owned the place (it's a new build) we'd worry about how to pay for it, but as we rent, we just make a phonecall and it gets sorted. I know other people have tough times with landlords etc so it's not for everyone but for us it has been great. We're in our 30s so will continue to save for a deposit for a house we'd like to buy rather than the only thing we can afford but don't actually want to live in!

I agree that people in the UK are more biased towards home ownership than other countries, but different strokes for different folks and all that!

HTH!

Thanks for all the advice it is all really helpful.

We do have mortgage protection in case of redundancy but then we wouldnt be able to pay the large loan we have. I have discussed with dh and we are going to see how we manage in the next couple of months and then make a decision. Another thing we could do is sell the house and buy something smaller and pay off our debt with the equity, then save the difference we would usually pay for the loan, that way we are still on the housing ladder.

Just about to post a similar thread when I spotted yours mummytopebs. could have written it myself!

We are in same situ and wondering whether to sell and rent. fixed into mortgage deal - which has gone through the roof this month - until June 2011 but seriously considering selling up and paying 8k penalty, as will give us chance to clear our 20k debts (c/cards) and rent slightly bigger house. paying over 1,500 pm and could easily get much nicer place for that around here.

Need to apply for DS high school next year so moving up the road slightly will mean a different school to his best mates round here which is making me wonder if we should do it.

Then I think he will make new friends (there will be plenty of people from his school going to this high school, just not his best mates)... and i made new friends at high school ..

basically each month we are short on money, house is too small and just thinking let's sell up, clear debts, put equity in bank (be about 50K) and try to save some more so we can get back on property ladder when we're sorted.

feels like the biggest decision we are making as it involves money / kids / school / friends etc. and such a gamble coming off the ladder and then trying to get back on again in the future.

sorry for long post, difficult talking to family as dont want to reveal all the debts, they think we should just buy another house but simply can't afford to at the mo