Selling the house – a tough decision to clear your debts

For most people, especially if you have children, your house isn’t some financial asset, it’s your home. A fundamental aim of debt advice is to find a way to let people stay in their house.

But there are some situations where you simply have to move and others where it is much the best option. If your other debt options all have big problems, selling your house may be the best way forward for your family.

Can you afford the house?

You must move when the mortgage and any secured loans on your house are too high to be affordable. If you get mortgage or secured loan arrears that you can’t repay, ultimately you are going to lose the house as it will be repossessed.

If your income has fallen and after paying the mortgage you have only £550 a month left to feed, clothe and pay the utility bills for you, your partner and two children then you simply aren’t going to manage. Perhaps you can get through this month and the next, but you cannot carry on as you will be borrowing more and more every month to make ends meet.

If you are sure this is only for a few months, it may be worth struggling through, but be realistic here. The longer you delay, the larger your debts will become.

Is it the right house in the right place for you?

You should seriously consider selling the house if this would leave you with money that could sort out all or a lot of your unsecured debts and any of the following apply:

• it would be cheaper to rent;
• the house is in the wrong place for work or schools so it is costing money and taking time to commute;
• the house is the wrong size – you have spare rooms now the kids have left home or you are bursting at the seams and need more space;
• you would be able to get help with the rent through Housing Benefit or Universal Credit if you rented somewhere – use the benefits checker here to investigate this;
• you have an interest-only mortgage, or a repayment mortgage that will not be cleared by the time you retire. Interest only mortgages are like a time bomb waiting to wreck your finances – if you are having problems with other debts as well, you have to take into account what you are going to do about your housing problems – see What are your options for an Interest only mortgage? for details;
• you are barely managing now and any mortgage interest rise would mean that you couldn’t cope. Interest rates aren’t going to stay this low forever – here is a calculator that works out how much a rate rise would cost you.

You should think about selling when it would leave you with money that could sort out all or a lot of your unsecured debts, you could rent somewhere at a similar or lower cost, and your other debt options don’t look good.

My kids would be heartbroken if we move

Probably not as much as you think – adults fret about bricks and mortar much more than children. It’s often quite easy to “sell” a move to children. Closer to shops, by a park with swings, near one of their friends, on a bus route to school… all things they may enjoy. You may think they will miss the garden, but if they are nearly teens, they probably won’t use the garden much more.

Staying where you are may mean you can’t afford to give them a clothes allowance or let them go on school trips or afford holidays. It’s not fair to burden children by asking them what they would prefer, so you have to weigh up all the pros and cons for them.

But my daughter is half way through taking her GCSEs

That is a good reason for staying where you are if moving house would mean she has to move schools. But spring/early summer is often a good time to sell a house, so perhaps you could plan to move at the end of June after her exams?

If you have several children, it is almost impossible to manage a house move so that it is at a convenient time for all of them in their different school stages. If selling the house is a good way of tackling your debt problems, you can’t wait 11 years until they have all left home.

I’ll never get back on the property ladder

Perhaps, perhaps not. But you aren’t really climbing that ladder, are you? More clinging on desperately. TV presenters such as Phil and Kirstie are not your best source for property advice, they don’t have to live with your debts and you do.