Should I Sell My House to Pay Off Debt?
Being in debt can be stressful, overwhelming, and downright terrifying. You may feel like you’re stuck in a hole, trying to dig your way out, and you might start to feel like you’ll never escape that burden.
If your debts get too large, you may even start looking at what you can sell off to alleviate some of that financial strain.
When you’re in that situation, you might start to ask, “Should I sell my house to pay off debt?” Read on to learn more about this option and when it might be the right choice for you.
Is Your Mortgage Too Much?
If you’re considering selling your house to pay off debt, one of the first things you should do is to consider how your house is impacting your overall financial health. Your house is a major investment and if you can avoid selling it, you’ll be able to get a greater return on that investment. However, the house also has to make financial sense for you in order for that to work.
You may have realized recently that your mortgage is too much for your current budget. Whether you got in over your head or your situation changed, you’re likely to only sink deeper into debt the longer you stay in your home. Selling that too-big mortgage and using the profits to get rid of debt can give you a good financial reset.
Are You Moving Anyway?
Of course, if you’re moving anyway, using some of those profits to pay off debt can be a great option. You’re already selling your home, so the real question is how to spend the profits you get from that sale. Putting them towards a new home can be great, but you may want to pull some of that money out to clear your debt.
Depending on where you’re moving, you might be able to downsize to a smaller house or even rent an apartment for less money than your mortgage. And with your debts paid off, you can get into a better financial situation than you were in in your old home. If you have to choose between debts to pay off, take care of your smaller bills first so you can roll those payments into tackling your larger bills.
Will Your Profit Cover Your Debts?
Another thing you need to consider when looking at selling your house is whether your profits will cover your debts. If your mortgage isn’t too large and you aren’t already moving, you might not have good reason to leave your home. Your new housing obligations may be the same or larger, and you won’t be building equity in your home.
In some cases, your house may be nice enough or your debts may be small enough that the expected profits will cover those debts. If this is the case, you might want to take some time to evaluate how critical it is that those debts be paid off right now. Is it worth leaving your home for, or can you find a way to slowly pay them down through other means?
Will Your New Living Arrangements Be Cheaper?
If you do decide to sell a house to pay off debt, it’s important to think about what you’ll do after the sale is complete. You have to have somewhere to live, and unless you’re moving back in with your parents, those living arrangements are going to cost money. You need to make sure those arrangements will be more affordable than your current home.
If your new living arrangements will be more expensive than your current ones, you’re just going to wind up in more debt than you had to begin with. If they’re just as expensive, it comes down to the question of if you have to pay those debts off right now. In either case, make sure that your future will be manageable even after you get your debts paid down.
Can You Take a Loan?
There are several options for how to pay off debt without having to sell your home. One great option that gets you the best of both worlds is to take a home equity loan to pay your debts. This loan is based on the current amount of equity you have in your house, so you’re essentially borrowing money from your home.
If you plan to take a loan to pay off debt, you need to keep in mind that at the end of the day, you’ll still owe the same amount of money. However, you may be able to get different terms on your new loan than on your current debt. A home equity loan is likely to have lower interest rates than credit cards, for instance, and you may be able to extend the amount of time you have to pay them off.
Can You Seek Out Financial Counseling?
Before you decide to sell your house to pay off your debts, it’s a good idea to explore all your financial options. Selling your house may be the best option, but it is a drastic lifestyle change. And depending on how you got your debts, it may wind up being a temporary solution without other intervention.
Talk to a financial counselor about your debt and your current financial situation before you make any final decisions. Oftentimes, your bank will provide these sorts of counseling services free of charge. The counselor can help you explore all your options and decide which is going to be the best long-term solution for you.
Should I Sell My House to Pay Off Debt?
Your home is likely your largest financial asset, and selling it can be a great way to pay off debt.
However, you need to consider all aspects of your situation first, including the cost of your mortgage, whether you’re moving anyway, and whether the profit from your house will even cover your debts. You also need to figure out what your new living arrangements will cost and what sort of other avenues you can pursue before going this route.
If you’d like to find more answers to the question, “Should I sell my house to pay off debt?” check out the rest of our site at Selling House. We can help you sell your house for cash fast, and we beat the other guys’ offers. Contact us today and sell your home as-is with no fees in as little as twenty-four hours.