Should You Sell Your House To Get Out Of Debt?

Managing a debt can be tough, and paying it off when its high can be nearly impossible, particularly when you do not have a substantial income. If you are looking to avoid unsecured loans or credit cards, there are many strategies that can be embraced to offer you relief, such as the implementation of an aggressive payoff strategy or a well laid-out debt management plan. However, if you are a homeowner, you might be wondering if you should sell your home to get out of debt.

Should you Downsize?

Downsizing is about trading your current home to a more cost-effective and smaller one, such as a condo. It could also mean moving to a similar house to what you have now, but in a more affordable area. Should your downsizing efforts be successful, not only will you bring your mortgage to the lowest amount possible, but also occupy a less a less expensive home that will allow you to clear other debts.

If you are looking to sell your home fast, it is advisable to contact an agent who can link you up with potential buyers quickly. Remember, if you have an outstanding mortgage balance, you will need to reduce it almost immediately after the sale, meaning you need to have enough home equity.

Begin by Determining why you are in Debt

For many homeowners, the idea of being stuck with debt can be extremely overwhelming. When it gets hard to clear it, the first thought that comes to mind is selling their home. What most do not consider is the long-term impact of the impulse decision. Before signing off the deal, begin by determining why and how you got into debt. While selling your house may seem like a quick fix, it is not always so.

First, how did you purchase the house you are living in now? Many people make the mistake of purchasing a house they cannot afford, simply because they qualified for it based on their income and credit score.

The other issue could be poor money management. Do you put enough into your savings and retirement or you just spend it all? It could be that you enjoy a lot of trips or are that person who picks up the bar tab each time you are out with friends. Staying out of debt takes a considerable amount of willpower and proper planning. If you are stuck in too much debt and believe that selling your house will get you out of it, it will not be too long before you are back at it again.

Emergencies are the other scares that put a lot of people into debt. Such could be issues like health problems or car breakdowns that could eventually elude your credit cards. If you do not have money management problems, selling your house could be a good idea.

Wil the Sale Pay Off?

As soon as you have come into terms with the causes of the current debt, you then need to assess the real estate market in your area. Will it be easy for you to sell fast or would you rather have an agent intervene? Note, your proceeds will be fully dependent on the amount of down payment initially laid out and the projections of the amount your home is worth.

Whether your mortgage is due in 20 years or 5 years, what makes the difference is the amount fetched. Ensure that what you get pays off your debt. If you decide to sell the house on your own with little expertise, it could mean selling at less than can cover your mortgage balance. It will then translate to a non-feasible deal. A real estate agent should estimate the worth of your current home and fetch you a high price for it.

Are there Risk in Selling your House to Pay off Debt?

Selling a house to pay off debt seems like a good idea, but it is also associated with many risks. Whether the idea will eventually pay off or not is fully dependent on the situation and the decisions made.

Understand that if you are planning on buying again, it could prove hard to qualify for a new home. With your current home, you do not need to qualify further because you already own it. Downsizing is perhaps a winning idea, but it will also depend on the maintenance, the cost of utilities and the area. Simply because you are ready to sell fast to cover your debt doesn’t necessarily mean that the market will be in your favor at the given moment. Work with a real estate agent in your plans to determine the worth of the sale and also be sure that the timing is right.

Selling your house to cover debt is not always the best or only way to do so. There could be other available options that you might not be aware of. It is in that case advisable to speak to an accredited credit manager for a more objective review.

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