Everyone buying property goes into it with the notion that it’s a true asset. This means that unlike a product such as a car that typically depreciates over time, its scarcity drives up its value.
Unfortunately, when you put money into a property, it can reduce your ability to pay bills. Typically, when a person is paid in a currency, this is added to a bank and depreciates with inflation or used to buy goods and services due to its liquidity.
Money, however, hasn’t been tied to a scarce resource such as gold since 1962, and this allows governments to print more money through a process called quantitative easing. The first country to do this was Japan in the 90s to help control its inflation. Unfortunately, what occurred was that Japan added two zeros onto its currency.
Selling a property to pay off debts provides you with liquidity without needing a 3rd party loan to cover your debts. In turn, this means you’re not paying interest rates or other fees. The challenge is that you are now without a scarce asset that appreciates, but likewise, you’re not looking at a home reposition. You may take the opportunity to downsize and consolidate your expenses. This action can give you better peace of mind, have less to clean, and free up cash flow for more exciting ventures.
Selling a home is a short-term move; once complete, consider buying an affordable home that’s within your means for longer-term wealth creation. In this article, we’ll take a look at some options that you may wish to take to ensure you’re not haemorrhaging money.
Dealing with Debts First
First, deciding to sell a property to pay off debts shouldn’t be taken lightly. Many charities and organizations can help you decide what to do. One that provides you with free legal advice is the Citizens Advice Bureau (CAB). These are governmental initiated charities that help provide anyone with free legal advice when you can’t pay a solicitor. You can locate them on most high streets due to their need to help people with economic hardship and curiosity.
Remember that if you’re selling a property to pay debts, you need to understand that no amount of assets or income will quench a more extensive debt creation process. You could have a small income and generate more wealth than a person with a significant income but excessive expenses. To be wealthy, you need to understand the term ‘frugality’ before considering how to get rich.
It will be likely that a large amount of debt will be from a property’s mortgage. This mortgage could be fixed or flexible. Almost all property developers use a fixed-term mortgage over the most extended loan period. This measure reduces weekly payment values, freeing equity to look at other opportunities.
Also, as debt is non-transitory, it is an excellent hedge against inflation, essentially paying part of it by itself. A fixed mortgage is usually more desirable as inevitably the cost will increase over this extended timeframe on a variable mortgage; you also know your weekly outgoing.
Alternate types of loans, such as payday loans and credit card debt, can be significant. These are some of the main reasons people consider selling a property. However, the interest on the debt builds up quickly and needs to be stopped before reaching exponentially large repayments. Get rid of these problematic financial instruments fast as soon as you know of them and have sought professional financial advice!
Apart from selling assets off, such as your home, you may be better off setting up an individual voluntary agreement (IVA). These last for five to six years and are a form of insolvency that enables creditors to get paid with whatever they can sensibly afford.
You will need to carefully consider these as you will be unable to get other loans during this period or start a business. You will, however, be able to keep your home, and after the time expires, all associated debt is written off. IVAs legally protect you from creditors and can be helpful to both parties.
For instance, credit card companies will know they will never be able to get the amount you owe back. Legal fees are punitive, so rather than chase you at a loss, they would instead take whatever they can. They will absorb this loss through other debtors.
Thinking to Sell?
If you are thinking to sell, then you may want to consider the following as you make your mind up:
- Could you generate revenue by renting part or all of the property out? This feature may help show a bank you have an income and help with debt consolidation.
- Do you have another destination you can live in? Don’t move out if you don’t!
- Poor credit ratings can affect your ability to get a mortgage on a new property.
- If you have more debt than the property’s value, you have negative equity. This term means the lender will need first to approve the sale, and then you’ll have to pay the difference.
- How much equity does your home have? This figure is the net value you own after the mortgage or secured debt.
When is the Time Right?
If you’re weighing up whether to sell your property to help cover your debt, then the sooner is better. Each day that goes by that you haven’t settled your debts accrues interest. Selling allows you to start things fresh and reduces the mental burden of debt.
Also, if your home is in danger of repossession, the very last thing you should be considering is handing it over to the lender. They will usually sell a property at auction for a loss to recover only their outstanding money.
If you’re thinking of selling, you’ll want to get the best price possible, yet not want to wait as your debts grow larger daily. The problem is that many assume that selling a property for a fair market value can take months. They also think it involves many parties, from surveyors to solicitors.
WeBuyAnyHomeExperts are the most significant home buying company in the UK. We buy homes and transfer funds to you within seven days of initial contact. Then, within 24 hours, we can provide you with a FREE, no-obligation and verified evaluation of your home. We base this on the local house sales in your street to ensure you get the best price.
However, you may be wondering how we are going to exploit your situation for our financial gain. To make life simple for buying the property, we don’t pass on any costs to you; everything is free!
We make our profit from your property being sold after absorbing all associated property costs with our cash reserves. We benefit from holding the property and waiting for the best buyer when you can’t.
If you’re interested in allowing us to help you, give us a call for a FREE no-obligation evaluation. If happy to proceed further, we can later verify this with a brief site visit within 24 hours. We don’t ask you to decide on selling while our professionals are onsite, and all this is still FREE.