Downsizing to pay off debts

Posted on 12 February 2011 by faye hanman


hi, we own our own home but because of the credit crunch ect, we have got ourselfs in debt and need to sell the house to release some equity to pay off our debts, would this be possible.our house has been valued at 139000, we want to downsize to a house worth 110000, our morgage at the moment is 111000, we are with abbey, the only way we could pay the debts would be to sell the house, we have been making minimum payments on our debts,have defaulted a couple of times. my husband has a better job now getting paid more money, do you think this could be an option.

Faye,

This is going to depend very much on what your credit records show. If they show that you have recent defaults and/or several missed payments registered against you it is going to be unlikely that you will be able to remortgage and reduce your monthly mortgage payments. Whilst you may have a smaller mortgage, the interest rate you would be paying is likely to be far higher than currently.

Even if your credit records are clear I am not sure you will have sufficient equity released to clear your debts and provide sufficient deposit on a new property? If you only have a small deposit the interest rates on a new mortgage are likely to be higher than you currently pay.

I recommend that get a copy of your credit file from one of the major credit reference agencies and then speak to your local Citizens Advice Bureau or the Consumer Credit Counselling Service about what action you can take to reduce the payments on your debts without downsizing.

Peter

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