Sell House to Pay Debt

I flipped 3 houses when I graduated to pay off my student loans. I payed them off in 2 years time. Keep in mind if you sell your house, you will spend the same amount of money for the exact same thing you have now that you sold your house for...In essence you will risk being upside down selling in an unstable market. If you can sell, wait, then sell when the market is boooming. Rent for a while, wait for the crash or a good deal then buy again when the market turns to a buyers market. You can get a foreclosure or something else cheaper. In return, creating equity and not being upside down. However, I would keep things status quo for the time being. Having equity in your house is a good thing these days. Being able to sell your house and pay off those student loans at the drop of a hat is a good option!!!

 

I definitely like that there is decent amount of equity after owning for two years and would hate to lose that. We liked at many options to refinance our student loan and nothing looks like it would take care of it all in less than 10 years......maybe we will have to look at the numbers again and figure out a different way, I hate lose the built equity.

 

Agreed. having a student loan (all being that it is a pain in the ass) is not a bad thing. Equity in your house is a good thing as long as the housing market is strong. The bad thing in a strong housing market is that you can actually loose equity by selling a big house for a ton of money but, buying a smaller house than you have now for a TON of money. Thus, being upside down. So, how do you get ahead and loose the monkey on your back? hmmmm good question. Time is the only answer I have for you right now. Back when I graduated college, things were easier. Right now in today's market, I just took a huge hit today!!!!, I don't have a good answer for you. For me, today, was bad. however, I am in it for the long haul. I came from no class and now have a middle class lifestyle. I am happy with that. tomorrow you never know things could look better.

 

Appreciate the advice, really helps! I just need to sit down and work a plan out (in the next 5 or so years to work the debt down).

 

Having a plan Is a great 1st step. hopefully all will go your way and the market, all being that of the housing or stock, will strengthen. Keep in mind markets are like nature. They will build and crash. like the shore line of the beach the tide comes in and builds the beach then the tide goes out and takes the beach away. A forest will grow until a fire comes along and burns it down and then will thrive again in the nutrients of the ashes. However, nobody can predict when the fire will come and how much of the beach will actually be rebuilt. So, just like nature the financial world is very unpredictable. The market goes up and goes down. Timing is everything. Sorry for being so philosophical but I believe we can learn a lot from nature. Anyway Good luck, buenos suerte and enjoy life. Compared to a tree we are only here for a millisecond.

 

No.
Unless you are living in a home you can't afford it doesn't make sense to sell to get out of debt.
Now you have to fine someplace else to live. Renting can be more expensive and where is your down payment for a new home if you spend it all on debt?

My advice would be to live like you live in a cardboard box and pay as much as can on your debts.
Make sure you have a decent emergency savings, put your 15% away for retirement, give yourself a modest budget for expenses and then pour the rest into your debt payments.

Get a second job if need be.

 

If you can afford the payments on the loans I'd recommend keeping them. Will help at the end of the year with taxes since you can claim the amount of interest you paid.

And if that doesn't work I heard you can sell your left nut on the black market for $35k!

 

We're living comfortably with our current mortgage payments and have no issue with them. With raises and new OT policy at work I can make larger payments towards debt, however it still doesn't seem like its going away fast enough haha. The majority of the debt, other than mortgage is student loans. Hopefully a good opportunity for refi will show up or something for the student loans, we'll see...thanks for the inputs.

 

You mentioned getting a plan together. That sounds like a good way to start. Figure out the means to which you can live and save then figure out how long it will take you to pay it off.
May help improve your patience and help you see the light at the end of the tunnel.

Good luck!!

 

I would drill down into your monthly "nut" to see if you could work out a one payment consolidated loan.

If you are able to rent your home when the "honey has the bun in the oven" and move to a new home in better school district that would be my plan #1. I think that would be a better option than selling for a townhouse. I would think you would get cramped quick!

Gods not making anymore land so if you could get someone else to pay your mortgage while you live in your home... That's worth a million $$ toward retirement (once it's paid for they are paying you).

 

This is tough but if you sell you house you will still need a place to live and paying rent is worse than paying a mortgage..
The best use of equity is to put it into a new house...
I work in fiance and I believe that the best use of equity is for future investment or for emergency use not debt repayment..
If you have the loans consolidated just keep the loans unless you can reduce the rate a lot than think about a home equity....
But home equity loans can be called in at any time and are very dangerous and should be reserved for emergency not debt repayment (remember 2008 bank crisis)

But housing goes through ups and downs and if you are making a quick profit and you can flip your house easy it might be a good idea to get rid of your debt but now you need a place to live....

But if you can find another 200K house flipping this one could work out and in a year or 2 housing could drop again and the economy could tighten up so being debt free could be a good thing...

Be smart about it.... your house is not a credit card, it's an investment....
You have to decide what is the best use of that profit, cash it in, charge against it or hold it for the future investment or emergency...

 

OP, what did you end up doing?

I'd not sell the home. From an investment point, double no if you are looking at a condo. Condo fees suck bad.

I don't love student loans but at least the interest is a tax credit. Pay off other debt faster first that doesn't offer that benefit.

Maybe like you said pull overtime or get a second job. For 7 yrs I have been on the board of a non-profit (dart league). Something I love anyway and it isn't making me rich but basically pays my truck payment.

 

Appreciate the advice! I think great minds think alike as we ended up doing a cash out refinance and paying off some student loans, not all but enough to save about 500/mo in payments. Also we got a very good interest rate, got rid of PMI and our monthly mortgage payment is lower than what we used to pay. So life is good right now, got alot of great advice here on TacomaWorld!!!

 

Don't try and borrow your way out of debt. Try looking into taking Dave Ramsey's financial peace university. I think selling your house is an ok idea but if you're just going to have to rent and save up money to get back to where you are it wouldn't make sense. If you were going to buy something in a similar price range as what you bought in at I would say go for it.

Don't refi to take cash out. Did I say btw not to refi to take cash out?

 

You're in a home now with (approximately) $100k +\- equity.

Sell it and pay off the student loans and what do you have? No debt, but no assets either (cars aren't assets they are expenses, and some are ludicrous). You've still gotta live somewhere and rent can't be a whole lot less than the mortgage payment you've got now.

IF you have the discipline, you could cut current expenses to the bone, put every spare dime to SL debt, and be free from those loans MUCH quicker than you think. As referenced earlier, Dave Ramsey says "Live like no one else (wants to) now so you can live like no one else later!". Lots of truth there.

This way you suffer for a couple years (Redbox and cheap wine versus movies and dinners at nice restaurants) and STILL have your house with even MORE equity at the end. Five years from now, where are you if you choose either path?

Suffer now and 5 years from now, no SL debt and maybe $150k equity or do the first idea and no SL debt but maybe only $10-15k in home equity (presuming you buy again soon and start building equity). If you do that way and rent for 5 yrs you've just spun your wheels. Good luck btw

 

Too late. He already took the cash out. Hopefully the housing market keeps going up and they don't get stuck upside down in this house.

 

We only took a percentage of our equity as cash out. Before, we owed 165k in principal and now we owe 215k in principal. Houses in neighborhood are selling for 265k+. Thank you for valuable input, but this financial decision will work out great for us!

 

Good for you if it helps your family get out of debt. Hope it works out for you.

 

You don't have to pay capital gains on house income after 2 years if you homesteaded it. At least in Minnesota.

 

Federally the law is if it has been your primary residence for any 2 of the last 5 years you are exempt from $250k of gain if single, $500k if you are married (with a few caveats naturally). Enough that the average person will never have to worry about it.

As a side note to the op that is a reasonable cushion to not go upside down. Personally I think that was a decent move. Debt load being about the same, I'd rather pay a 3.75% mortgage than a 6% student loan.