Debt is a growing problem in America. In fact, the nation’s consumer credit spending ballooned to record highs in 2018, as debt levels swelled to new levels. Overall consumer debt soared to $13.3 trillion in the last quarter of 2018.
If you are one of the many who feel like they are swimming in debt, you are probably looking for a way to get out from under it. But once your debt grows to a certain level, it can seem almost impossible to pay off, as interest prevents you from making much of a dent with monthly payments. Short of winning the lottery, you may feel helpless to ever get out from under your debt.
So, what’s the answer? If you are a homeowner facing a mountain of debt, your only hope for relief may be to sell your house to pay off debt. After all, it’s your biggest asset, so selling it and starting over may be your best move.
Consider Why You Are in Debt
Whether selling your house is the answer to erasing your debt depends on why you ended up in debt in the first place. If your debt is due to a one-time event or issue in your past, such as too many student loans or catastrophic medical bills, selling your home to start over with a clean slate and avoid bankruptcy or further damage to your credit might be your best option.
But, if your debt is due to compulsive spending, gambling or some other ongoing problem you have yet to address, then selling your house will do nothing more than remove your biggest asset from the picture.
You are likely to fall right back into the habits that got you into debt in the first place. Understand the difference between selling a house to pay off student loans and selling to pay off credit cards from too many shopping sprees.
How Much Money Will You Actually Make from Selling?
Before determining whether selling your home is the answer to getting out from under your debt, you need to determine how much the sale will net you. It may not be possible to pay off all your debt by selling your home.
Begin by considering how much you still owe on your mortgage. This will need to be subtracted from the anticipated sale price. But there are likely to be other costs as well. You may need to put money into some maintenance before your home is ready to go on the market. You might also need to subtract real estate commissions and repairs requested by the potential buyer.
You May Make More Money by Renting
There are other options that could help you pay off debt quicker, although not all at one time. For example, you could rent out your home instead. While this wouldn’t give you one large payout, it would provide you with a fairly stable second income stream you could devote to putting against your debt.
In order to make an intelligent decision about whether selling or renting might be the solution to your financial challenges, begin with an understanding of the market and rental values for your home.
Have Your Next Place Picked Out
Before moving or selling your home, you will need to have another place to live. Whether you can find a place at a considerably lower price that still meets your needs will also help determine whether it makes sense to sell or rent your house to pay off debt.
Selling your home is not the answer to get out of debt if you are unable to find a much less expensive living arrangement to move to instead. Downsizing may not necessarily save you money, either. The price depends on more than just square footage. Market conditions, location, and other factors also enter the picture and help determine whether you can downsize your house to get out of debt.
What’s at Risk?
Your home is likely the largest purchase of your life. If you have had your home for a number of years or you have seen housing prices climb quickly in your neighborhood, then you may have considerable equity in your home. If you feel like your other debt is crushing you, then selling your home to pay off your debt may make some sense.
But if market conditions are not in your favor and you don’t do your homework, you could stand to lose a lot of money. Even if it makes financial sense to sell your home to get out from under your debt, you lose the benefits of homeownership if you need to rent your next home.
If you still determine that selling your house is the best option for your situation, be sure to do so in a way that minimizes your costs. Selling with HomeGo can cut down on selling expenses because HomeGo will buy your home as-is and won’t ask you to make costly repairs or upgrades. You also won’t pay any commission costs or fees, enabling you to keep more green in your pocket to put toward your debt.
When in debt, you likely need to act fast to avoid foreclosure and begin working your way out of debt before your other assets are put at risk. HomeGo provides peace of mind to sellers with same-day offers and the ability to close in as little as 7 days.