It’s never easy to consider selling your home for any reason other than upgrading to your dream home. Sadly, for many homeowners in debt the decision has to be considered because that house is often their most expensive asset and their largest monthly expense, making it one of the best ways to cut into outstanding debt before it accrues more interest and gets out of control.
If you find yourself asking, “Should I sell my home to pay off debt?”, you’ve come to the right resource. Below we’ll give you some questions to ask yourself to help you decide.
Evaluating Your Position
Considering selling your home can be an emotional process, so it’s important that you sit down and take the time to evaluate where you stand both financially and mentally before making a decision. Nobody wants to sell their home, but in some cases it may be the right choice.
Have I Spoken to a Debt Consolidation Specialist?
Before you even consider your options, it is important to get a grasp on your debt so that you can build a plan (with or without selling your home) to get out of debt. This starts with working with a debt consolidation firm – a company that specializes in organizing, lowering, and settling your debts. From reducing monthly payments to lowering interest according to a payment plan, they’ll help you figure out how much you actually owe so that you can determine whether you should sell your home to clear the debt or if you can budget to get off the debt treadmill.
Is My Budget Sustainable?
When it comes to your finances, your income and expenses make or break your financial decisions – especially when it comes to your home. Debt accumulates because your expenses are higher than your income, creating a deficit. Thanks to interest, the longer you are in a deficit the more you have to earn to keep up with your debt payments and interest payments. The answer? Earn more or spend less.
Part of deciding whether or not you should sell your home to pay off debt is getting your budget under control, identifying ways you can lower expenses or increase your income. You should also consider any expectations for income or expense increases or decreases. For example, having a baby would increase your expenses and likely require you to downsize. However, if you are expecting a promotion or are completing additional education to increase your salary in the near future, you may be able to hold off on selling your home until you get a better idea of your future income.
Selling your home will allow you to pay off a bulk of debt at once, stopping the accumulation of interest and allowing you to reevaluate your income and expenses so that you can move into a more affordable home – either temporarily or for the near future.
How Much Is My Home Worth and How Much Do I Owe on My Mortgage?
If you could sell your home for $500,000 now or $750,000 in a year, would that make your home selling decision easier? Of course it would! The value of your home dictates the benefits that selling it will provide (and how much easier it is for you to move on from it). If your home is worth more than the mortgage owed, you free up that money to pay down other debts to put you closer to or entirely into freedom from debt. However, if selling your home doesn’t resolve enough of your debts it becomes a bigger problem because in order to cover the remaining debt, you’ll have to seriously downsize your living situation to keep up with payments
Are There Cheaper Properties I Can Live With?
Underwater on your mortgage or racked up credit card debt? Lowering your monthly living expenses is one of the best ways to increase your savings for paying down debts, and moving to a less expensive home does just that for you. If you don’t have money free for a down payment, renting may be the better choice until your debts are under control.
In some cases, there may be a similar property available to you with a lower level of living (but also lower cost per month) that will allow you to live a comfortable lifestyle while saving more to put towards debt until you’re free. Just be sure that the difference is significant enough to put a good dent in your debts over a few years. However, once you’re debt-free the peace of mind will be worth a few months or years of downsized living.
Debt Consolidation: The Secret Weapon in Fighting Debt
“Should I sell my home to pay off debt?” is a simple question with a complex answer. However, the best way to begin learning the correct answer for you is to first know what kind of debts you’re paying back. With the help of Christian Debt Counselors, you’ll have an expertly crafted overview of your debts as well as the best ways to go about reducing your payments. They can consolidate your debt into a single payment, making it easier to balance your budget so that you know whether or not you need to sell your home.
If you’re considering selling your home but want to make sure you know exactly what you’re getting into, give Christian Debt Counselors a call today.