Sometimes, debt is unbearable. The amount of debt you have can be more than just an annoying problem. It could be ruining your life.
The natural solution then becomes one related to your biggest asset. As Kelvin Elliott of Yes! Homebuyers explains, “Selling your home to reduce or remove debt can sometimes be both a sensible and effective course of action, especially if you feel you’re in the wrong property.”
However, as in most situations involving debt, it is not necessarily as simple as you might think. Selling to manage debt requires clear-thinking, and an understanding of the most efficient ways to manage the process.
And it means that you need to think about some key questions…
The big question: can you afford the property?
Selling a home (even when you’re not in debt) is an emotional issue.
But the key question is about affordability. If you find yourself with very little cash after you have paid the bills and loans attached to the property, and this is happening every month, there is every reason to sell the property. That’s because having a home that makes your lifestyle challenging means having a property that is a burden.
Looking at it another way, having a property that you simply cannot afford only leads to one outcome. You’ll end up in a situation where the debts and payments outweigh the income you have, and that can only lead to your lender repossessing.
It’s a worrying situation to be in, and it only gets worse as time goes on. So selling makes perfect sense. There’s no point holding onto a property you simply cannot afford.
As soon as your debt with the property becomes unmanageable and you’re perhaps borrowing to pay it off, it’s time to sell.
Another question: are you simply in the wrong property?
Your home could be the wrong home. A number of factors are involved, but if you are in a situation where the following points apply, you need to consider selling:
- Are you secure against a rise in interest rates? This is a crucial aspect. homeowners who are in danger of slipping into a serious financial difficulty if the interest rates rise are just waiting for the inevitable. Interest rates are entirely outside our area of control. If the country experiences a rise, such as the rise from 0.5% to 0.75% in the UK as of September 2018, even a small increase can push you further into debt. On a £150,000 variable mortgage, a rise to 0.75% is likely to increase the annual cost by £224.
- It would be cheaper to rent. More and more people are renting, and it does make perfect sense if you’re slipping into debt because of your mortgage. If it’s cheaper to rent, take the plunge and rent.
- Your children have flown the nest. If your children have moved out and you have no real need for the extra space this provides, it’s logical to downsize to a smaller level of borrowing.
- You’ve had a change in jobs. It’s not uncommon for people to take on work that is in another town, or far enough away to bring in extra costs. If this is the case, you have a legitimate reason to move. Larger commuting costs can simply mean more debt.
- The mortgage is the problem. Some people secure their home on an interest-only mortgage. If you’re going to be outlived by your mortgage, it’s bad news. And if you’re on a mortgage deal that you won’t pay off for decades, that is again a reason to look elsewhere.
The situations above can all mean extra debt. And debt that has come about because of your home is debt that needs fixing quickly.
In any case, if the above looks like your situation in any way, you should start to think about selling to clear debts.
But will it help?
If selling will help to clear all of the debt that you’ve accrued, then you should most definitely be pursuing a sale. It’s important that you are fully aware of your debt size, and the subsequent reduction of that debt after selling up.
At the same time, it is more than sensible to approach a home buying service. For people who decide to sell to clear debt, it suddenly becomes much more complicated when they realise how slow the market is. Selling a property (even a highly desirable one) can take 5-6 months on average. But specialist homebuyer companies can usually turn things around in weeks or even days.
If it helps to clear your debts, sell your property. But don’t do that until you have found the quickest way to sell (usually a homebuyer company) and know that selling the home is a sensible course of action.
Selling a home quickly through a specialist homebuyer company ensures that debts don’t get any bigger, and that debts are paid off. Waiting up to eighteen months can just make the problem worse.
If you need to pay off debts, and your biggest asset is the solution, the sooner you do it the better. Tackle the issue head-on, and you’ll be out of debt quickly. Leave it to the whim of the market, and you’re just looking at a long-term, painful problem.