Would you sell your house to be (almost) debt free?

[RobinAZ]

Due to several layoffs, a major health event, and then a divorce, my credit is shot and I have $18k in CCs, $9k on my 2005 Honda (only 51k miles), $5k in taxes, and about $1k left on the medical bills. The monthly payments on these totals $850, plus the mortgage of $1180 (and the maintenance, utilities, etc). I also have $204k in student loans and am paying $77/mo through Income-based repayment.

If I sold the house I could pay all of the non-student loan debt and have about $30k left over.  Renting a comparable house would be about the same as my current mortgage, and we are stuck in this neighborhood because my son is in an autism program here. Have to be living in-district.  Utilities would probably be the same, but I wouldn't have to maintain anything.  I would look for a cheaper townhouse, but it would be luck of the timing if one is available at the time I am looking to move.

If I stay in this house, with my income as it is right now, I calculate 47 months to pay the non- student loan debt.

I would appreciate any thoughts. Divorce is final in 8 days, which is also my next pay day, and I have $90 until then.  I am really starting over (at 45) but I am ok. I would just appreciate hearing other's thoughts.

TIA - Robin

[Another Reader]

Can't remember what city you live in, but you are going to have a difficult time finding a house under $1,200 in the inner East Valley.  Scottsdale is near impossible.  The rental market is fairly tight and competitive.  Rents are up significantly and continue to go up.  With your credit history, few landlords will rent to you.  If your son has serious behavior issues, you may find over time that you are shut out of a lot of rentals because of prior landlord reports. 

IIRC, you are now employed in the legal field - is that stable? If it is, in your shoes I would stick it out for awhile until you get past the divorce and see what's possible.

[Cassie]

I would sell to get out from under all that debt. It would lower your expenses and give you more $ each month even if you have to pay more for rent then your mortgage.

[RobinAZ]

Thanks for the replies. I am in North Central.  Rents around here are also $1200+ for houses. Town homes are lower, but there aren't as many.  We need to stay in Madison school district for his program. 

Yeah-- the credit thing sucks.  I think it may be the tipping point to staying put for now. 24 months and my FICO score will rebound.  No charge offs or repos, thank goodness, just late pays.  I won't be 750 again, but it will be passable.  My son doesn't have behavior problems, he is gifted/ high-functioning autism with mood and sensory issues, so that wouldn't be an issue in a rental. 

I am in law.  My workload is so erratic. I am limited on the types and number of matters I can take on because of my son's needs. I am scraping along, it is terrifying and exhausting. I have really improved my budget since splitting up. I have three more months of this stupid cell phone plan and then my bill will drop another $160/mo. 

It's just really hard to balance the kid, the schooling, the medical costs, housing, workload AND to feel like I am suffocating from debt.  If it was just me, or even if he was typical, it would be no problem. I could downsize, move to the west side or AJ!!! Just live as far under my income as humanly possible. It is crazy but my fantasy is living in a paid for mobile home with $400/mo lot rent, practicing law like I am now, and a side hustle I can do at night or when he is in tow, and hoarding cash.

[Bateaux]

Sorry things are so tough.  I'd sell the house.  Rent a townhouse and live cheap while attacking the debt.  Jope it gets better for you.  The paid off mobile home future isn't a bad thing.  Expensive houses are stupid unless you are wealthy.

[AZDude]

$1,200 is very doable in North Central Phoenix. I would do it. The only other option is bankruptcy.

[thd7t]

It doesn't seem like you are very attached to the house. If you didn't own it, would you buy a house, now? It sounds like you wouldn't. I think that selling the house is a good option.

[Bergal]

I would sell it.  Without the debt looming over you AND the cushion of the extra money you'd have peace of mind and much less stress and worry.  That's golden!!

[Tyson]

I tend to agree - sell and in one fell swoop you solve your monthly cash flow problems.  Plus if it's a house you shared with your ex, maybe time to sell and move on anyway.  With only 2 people now instead of 3, you could probably even downsize your living space and save even more money, plus get a fresh start (emotionally) in a new place.

[RobinAZ]

I have been looking nonstop.  There is almost nothing under $1200 in this damn school district.  I have 2 dogs (no, not dealing with giving dogs away and watching the kid with the mood disorder fall apart, nope) so apartments are out. I can't be working all day and no yard.  There was one patio home that rented the first day!!  No townhomes right now that I can find on MLS or Craigslist. 

It is staying in this district that is hard.  I need to go far west or far east of where I am for the lower costs but he is doing so much better, I just can't bear to move him. 

I will keep looking.  House across the street and down two is my exact model and just closed at $245, I owe $163, so that would be a nice cushion after paying everything except the student loans.  Do I love this house??? No.  I like it a lot.  I'll never get a house this inexpensive again in this town, absent another financial collapse, and paying rent for a long time isn't appealing.  I HATE the idea of renting.  You are at the whims and mercies of someone else.

If I sold, but stayed in this area for the school, I would need $3411/mo (and that's comfortable, not mega-spartan,lol).  That is less than HALF what I was spending 6 months ago.  Right now I am consistently bringing home $4000.  And I believe if I wasn't so frazzled, I'd be more productive.

[calimom]

Eeek, $204K plus other debt is a LOT, on a $4K per month salary. Are you getting any child support? Agree with the other posters that selling the house yesterday is probably the only way to start to dig out of the hole you're in. What are the best frugal options for housing? What can you do to up your income/reduce your student loan debt? Is the school district a non-negotiable?

Best to you and your child moving forward, and hope things ease up soon.

[Dicey]

$1,200 is very doable in North Central Phoenix. I would do it. The only other option is bankruptcy.

Whoa, not so fast!  How about getting a roommate? Air B&B since you're in a desirable area? Even more creative: during the high season, rent out your whole house and move temporarily into super-cheap digs. (The mobile of your dreams?) Then move back when the snowbirds go home. Make your house work for you without giving it up. Tbere, three more options off the top of my head. Bankruptcy is far from the only other option. Good luck to you.

[ptgearguy]

Rent is really rough in my area as well. Cant rent a house for under 1500 if it is in a decent location. Buying is also expensive with a home starting at about 350k :(. Canada sucks sometimes haha.

In your shoes I think I would sell and keep looking for a good rental.

[Another Reader]

Rental vacancy in the Phoenix area is very low, less than one percent in desirable areas.  My property management company is showing about 1 percent valley-wide right now, but that's because all the June notices were just handed in and a lot of people move when school is over in mid-May.  Last month they were at 0.2 percent vacancy.  With multiple applicants, why would a landlord take someone with two dogs and a poor credit score? 

Rents are also going up, probably another 5 percent this year.  In your shoes, as long as the job is stable, I would stick it out at your current property.  Your payment is relatively stable (taxes are also increasing).  Stay with the house and look for ways to increase your billings and decrease your other expenses.

[Cassie]

The idea of a roommate is a good one. When my dh had to work out of town for a year he rented a room in the old couples house.  Basically he slept there and came home on weekends. Also a grad student would make a good roommate as they are serious about college.

[MsPeacock]

Started over myself post divorce with a lot of bills and financial scramble a few years ago. I second or third the recommendation for a roommate. I have a finished bedroom basement and have rented it out and it made the cash flow situation much better. Cut wherever else you cam, cable, cell phone, less expensive car, etc.   For me personally I wanted to stay in my house for stability for the kids. Stop paying or renegotiate the medical bills, bounce the cc balance to zero interest cards if possible, etc.

[RobinAZ]

I will look into the Airbnb and roommate ideas, those are good.  I have an 1100 sq ft 3/1-- not sure how desirable that would be but I will definitely look into it.  I could definitely rent the house for more than the mortgage but there is just nothing in this area to make that worthwhile.

There are only two school districts that have the program he needs, where we are and Paradise Valley which is way more expensive. 

Before he started showing symptoms of the mood disorder, I made $150k/year. I am making 1/3 of that now because he has been so unstable. Your 5 year old telling you he wants to die makes it hard to work full time, or focus.  As he improves, I work more.  The year he was diagnosed I made $20k :-). So hey, I have more than doubled that!!  Working more would solve a whole lot of this. 

Bankruptcy really isn't helpful because I am still paying the car and taxes- I would be shedding $20k which is about $400/mo. I would never advise someone to file over $20k. 

Meh.

[CanuckExpat]

Can you run financials through a Rent vs Buy calculator

It's kind of a reverse scenario, but I think you can still make it work: the "downpayment" is how much capital you free up by selling, and the opportunity cost / investment returns is the interest rate on your loans.

[darkadams00]

I would sell the house and move, but that's under my constraints and preferences, not the ones you have listed (have bad credit score, must keep same school district, must have dogs, must have yard, must stay in the same city, etc). I made a similar salary years ago and paid off a similar debt load (not including your student loans) without any issues in about three years. Housing was about $1150 at the time for me. But I was willing to chip at it for awhile without it stressing me out. I just lived off much less than I made and paid the max amount possible each month.

Your problem doesn't seem to be your home. It seems to be your life--recent separation/divorce, challenging son, hectic daily/weekly schedule. If your income is stable (within a few percentage points), you should be able to map out a budget, stick with it, and move on. At your age and with a 5-yr old, you aren't looking to retire early, so debt is just a set of numbers on paper. It sucks to be poor, but attitude is half the battle. Live frugally, take in a boarder if you want, and pay your bills. Your child will get older, your debts will dwindle, and your home equity will grow.

[EnjoyIt]

I would not sell the house if the house is in pretty good shape and you are not expecting any huge fixes in the next 3 years. 
1)  Selling your house for $240K will cost you 6% in fees ($14.4K,) plus upgrades to make the house sellable 2% ($4.8K) and moving fees ($800.)  Therefor by selling your home you are dropping almost $20K, which will cut into your expected cushion.
2) In a very short time you should be able to get rid of the medical loan and the taxes. 
3) You are about to cut your cell phone plan by $100+ a month
4) Who cares about those school loans since they will disappear eventually one day.
5) If you rented out a room that should help
6) Sell everything you own that you don't use (even old clothes if possible.)
7) Your income should increase in the future.

My advice:
Make a spreadsheet with your loans and and how much you are paying every month and how they will be knocked out over the months with your current income. If you make the spread sheet intricate enough, you can even put in small changes to your income and see how that affects pay off time.  If the timeframe looks reasonable and you are able to get out of this hole then maybe selling your house is not the correct answer considering you currently live in a desirable area in a district you feel is important to stay in for your child.  Not to mention there is currently nothing available to rent right?  Well then you are kinda stuck with keeping the house for now.  So make the best of what you have and try and kick that debt in the teeth while you are looking for a rental.  Who knows, once all the stress with the divorce is over, you are back into a routine, you may find yourself in a much better situation than it currently looks.

[deeshen13]

Just wanted to give another thumbs up to the roommate idea.  I actually live with 3 other roommates in my house, and have a friend who rents out to 4 other roommates plus rents his garage to his neighbor for another 150 bucks.  Now we both don't have children, so are more flexible to the shared living spaces.  However, getting 1 decent roommate in a basement bedroom for ~500-600 bucks isn't that hard and probably well worth it for the cash inflow.

Best of luck!

[mozar]

I have 3 bedrooms and 1 bath, 920 square foot house and I have a roommate. He's annoying sometimes but its worth the extra 7k a year.

[Rhoon]

Can you refinance the house (is your ex on the loan)? You clearly have equity in the house. Mortgage interest is tax deductible, credit card payments and the like are not. What's the student loan repayment plan look like long term? $77/mo now, but is that forever? Or is there a cap to number of years you can do that? Or after 20 years it just gets forgiven? If there's a forgiveness clause somewhere or a max number of years they can make you repay, I'd ride it out to the end.

Depending on what you bought the house at, if your refinance doesn't surpass that original loan value, and stays under 80/20 (no PMI), your payments could even go down?

[Dicey]

Can you refinance the house (is your ex on the loan)? You clearly have equity in the house. Mortgage interest is tax deductible, credit card payments and the like are not. What's the student loan repayment plan look like long term? $77/mo now, but is that forever? Or is there a cap to number of years you can do that? Or after 20 years it just gets forgiven? If there's a forgiveness clause somewhere or a max number of years they can make you repay, I'd ride it out to the end.

Depending on what you bought the house at, if your refinance doesn't surpass that original loan value, and stays under 80/20 (no PMI), your payments could even go down?

Due to several layoffs, a major health event, and then a divorce, my credit is shot…

RHoon, while your suggestion is an excellent one in theory, I believe that RobinAZ answered this in the very first line.

[b_girl]

I would normally say - sell and pay it off. But with your life situation, I would be hesitant to sell as you do not have much flexibility. Lack of flexibility could put you in a worse situation.

I know it's depressing to look at the debt. But... I would at least give it a good 6 months and see how things are. You are going thru a lot of changes right now. Let the changes settle.

I would second the roommate if possible. Sharing a bathroom isn't ideal but you just lower the price accordingly. My dh and I have had roommates for years (with more bathrooms). That could give you the breathing room you need.

[Rollin]

I would not sell the house if the house is in pretty good shape and you are not expecting any huge fixes in the next 3 years. 
1)  Selling your house for $240K will cost you 6% in fees ($14.4K,) plus upgrades to make the house sellable 2% ($4.8K) and moving fees ($800.)  Therefor by selling your home you are dropping almost $20K, which will cut into your expected cushion.
2) In a very short time you should be able to get rid of the medical loan and the taxes. 
3) You are about to cut your cell phone plan by $100+ a month
4) Who cares about those school loans since they will disappear eventually one day.
5) If you rented out a room that should help
6) Sell everything you own that you don't use (even old clothes if possible.)
7) Your income should increase in the future.

My advice:
Make a spreadsheet with your loans and and how much you are paying every month and how they will be knocked out over the months with your current income. If you make the spread sheet intricate enough, you can even put in small changes to your income and see how that affects pay off time.  If the timeframe looks reasonable and you are able to get out of this hole then maybe selling your house is not the correct answer considering you currently live in a desirable area in a district you feel is important to stay in for your child.  Not to mention there is currently nothing available to rent right?  Well then you are kinda stuck with keeping the house for now.  So make the best of what you have and try and kick that debt in the teeth while you are looking for a rental.  Who knows, once all the stress with the divorce is over, you are back into a routine, you may find yourself in a much better situation than it currently looks.

+1, especially "Who knows, once all the stress with the divorce is over, you are back into a routine, you may find yourself in a much better situation than it currently looks."

[debbie does duncan]

I am sorry you are having such a tough time. This will get better.
 I wonder if you have thought about staying for now. Do you just need to be still and breathe for a bit ? It sounds like your son needs the stability of staying in his home and school.
 You like the house and yard and everything is already in place. No move needed.
I would stay and wait out this storm.
 4 years from now you will be in a different place and maybe surprised at how badass you are.

[Dicey]

In another context, there is a phrase "A permanent solution to a temporary problem". Selling the house to settle these debts seems like a permanent solution to me. Easier to hang on to what you have than start all over after the debt is gone. While this might not be the advice I'd give everyone, due to your child's situation, it seems the best choice. This autistic kid has enough to deal with, due to the recent divorce, however amicable it may (or may not) have been. Don't make him move out of his home too. At the very least, wait a year and revisit the idea then.

[sun and sand]

I can so relate to your dilemma.  I divorced in my late 40's and I have an autistic son.  To get him into an autism program I also needed to move.  I sold my home and rented an apartment in the school district.  Rents were expensive, vacancies low, and houses increased 8% the year after I sold.   I bought a much smaller house in the school district and still have enough room to have two foreign language students. Two students bring in $1600 per month.  Now I need to cook for them, but having people around that my son practises his social skills on is a good thing. This has worked much better than renting an apartment.  It was a great move for us--much friendlier neighbours--can be frugal and no one thinks I am weird.   Good luck!

[RobinAZ]

Everyone has been so kind, thank you.  One thing I have is a huge network.  I do about 300 hours of pro bono/year and I meet a lot of people.  Lawyer schmoozing, lol.  Anyway, I reached out.  I have been overwhelmed with such warmth.  Two small contractors I have worked with offered to prep my house, in and out, for only the cost of materials.  My realtor offered to wave her 3%.  Everyone and their brother (literally) has offered to help me move.  And my two best friends are coming to help me have a yard sale next week to sell everything that isn't essential.

I made a map of every rental I could find in the school district on CList, MLS, Rent.com, and drove the streets today. The first place I went to was perfect, lol.  I emailed the owner... she loves basset hounds and has no problem with two dogs and a cat.  $150 fully refundable pet deposit.  That's it.  I am meeting her tomorrow morning because I just peeked in the windows today and we are talking money.  I am bringing a pen to sign a lease and a larger deposit check than she advertised, no doubt.  If it doesn't work out because of the credit score, I move to Plan B but it is a great little townhouse.  912 sq ft, 2bd/2ba, less than my current mortgage without the higher maintenance and utility costs. 

I have been praying for months for a solution that felt peaceful.  Other than having to pack, lol, this feels right.  My son has no attachment to this house- he is keeping the dogs, his computers, his coding classes, karate, the video games, his school, and the new place has a community pool. And I would be happy to rent for a few years and stay put.  He has very high-functioning autism/Asperger's and the mood disorder, he doesn't attach to places, but he does like structure.  Honestly, I am trading the chaos of managing my job and this debt for the chaos of moving him, and I will have to make it work because I am miserable owing this money.

Paid for car (again), no credit cards (again), no tax debt (again), little rental house (again), lower five-figures in a savings account (again)-- it's like it is 2010 all over again!  That would make me 39!!!!!!!!!!!!

[FIreDrill]

Looks like you found a great place and have awesome people to support you.  So glade everything is working out :)

Sent from my klte using Tapatalk

[EnjoyIt]

That's awesome. Glad you have this support and was able to find something so quickly. I was one of the above recommending staying and gave reasons that you knocked out of the park. Again, glad things look like they are working out for you. If you can, a few months down the road let us know how things are going.

[Smevans]

Closed on selling my house yesterday. Feels great to have $103k less debt!

[deeshen13]

Really happy to hear this update RobinAZ.

Please keep us posted.  You have an awesome attitude!

[LeRainDrop]

Robin, I'm so glad to hear that things are moving along smoothly for you.  It sounds like this change will be a great thing all around.  Wishing you luck in closing the deal!

[Dicey]

Fingers crossed for the best news possible. Can't wait for the next update.

[thd7t]

I see a lot of posts here from people in various degrees of difficult situations where they ask for advice and then either don't like what they hear or don't want to do the work to fix the problem. This thread is the opposite. You have listened, been responsive, and worked to get the results you needed. This looks like your work paying off! Hope it goes well.

[RobinAZ]

The townhouse was very cute, and my son charmed the pants off the owner- whose daughter is highly gifted and "eccentric," and she also went through a divorce and had to start over.  My son loved the place and went home and started packing. The owner told me not to bother with a credit check and didn't want any additional deposit money. The lease is signed and I feel so blessed.

Another house on my street went up for sale and was under contract in two weeks for list price.  I am not listing until we are moved out so that we don't have to juggle dogs and a kid and showings.  I get the keys May 15th and I spent the weekend purging. By yet another lucky strike, bulk trash is tomorrow. So, I had a quick yard sale with as much as I could pull out to the driveway that I am not going to need or can't fit- extra sofa, 3 bookcases, tools and yard stuff, holiday decorations, a ton of crap.  I made $400 and the remainder is at the curb for pick up tomorrow. :-)

This week I am moving the remaining plastic tubs of seasonal items and all of my power tools to my dad's garage. That will leave me with an empty shed and an empty storage room at my house. They will be the staging area for boxes... Every time I pack non-essentials, the box goes in there. For those of you who don't spend a lot of time with Aspy kids--- pack when they are asleep and put the boxes out of sight EXCEPT their stuff, lol!!  Today, he packed a box of books that are too young for him now. Over the next couple of days he wants to pack up some toys that he can give two younger kids. And he asked for a special box for his video games and he wants that to go with us in our car, along with his computer and the PS3 and PS4, lol. Priorities.

I am so excited.  Thank you again, everyone, for your thoughts. What tipped the scales was 1) my son just loved the place, and 2) being debt free except the student loans was worth more to me than owning a house. I can't wait to write those checks!! 

What is going to happen is that I will sell, and pay off all the bills, and then start making money. And I am going to resist the lifestyle creep and start saving money. Goal #1 is saving 50% of what I earn. That is going to mean netting $7k/mo.  It is doable.

I am too excited to sleep.



 

[LeRainDrop]

Wow, I am super impressed!  Robin, you have so much strength, courage, drive, and intelligence.  Awesome momentum so far -- keep it up!  I am sure you and your son are going to thrive on this path you are forging.

I agree with lhamo that it would be neat to continue following your journey in the journal section.  You could even start it with links to some of your earlier threads that represent the earlier parts of your tale.

[RobinAZ]

Closed on selling my house yesterday. Feels great to have $103k less debt!

Congratulations!!!!!

[RobinAZ]

I actually started a journal quite a while back, right after I got married. It is sad to read- I kept having these plans to get this debt paid off and it is three years later.  Anyway, it is here:

http://forum.mrmoneymustache.com/journals/robin-az-may-2013-and-beyond!/msg80010/#msg80010

I am not giving up though.  Opportunity is everywhere.

[Secretly Saving]

The townhouse was very cute, and my son charmed the pants off the owner- whose daughter is highly gifted and "eccentric," and she also went through a divorce and had to start over.  My son loved the place and went home and started packing. The owner told me not to bother with a credit check and didn't want any additional deposit money. The lease is signed and I feel so blessed.

Another house on my street went up for sale and was under contract in two weeks for list price.  I am not listing until we are moved out so that we don't have to juggle dogs and a kid and showings.  I get the keys May 15th and I spent the weekend purging. By yet another lucky strike, bulk trash is tomorrow. So, I had a quick yard sale with as much as I could pull out to the driveway that I am not going to need or can't fit- extra sofa, 3 bookcases, tools and yard stuff, holiday decorations, a ton of crap.  I made $400 and the remainder is at the curb for pick up tomorrow. :-)

This week I am moving the remaining plastic tubs of seasonal items and all of my power tools to my dad's garage. That will leave me with an empty shed and an empty storage room at my house. They will be the staging area for boxes... Every time I pack non-essentials, the box goes in there. For those of you who don't spend a lot of time with Aspy kids--- pack when they are asleep and put the boxes out of sight EXCEPT their stuff, lol!!  Today, he packed a box of books that are too young for him now. Over the next couple of days he wants to pack up some toys that he can give two younger kids. And he asked for a special box for his video games and he wants that to go with us in our car, along with his computer and the PS3 and PS4, lol. Priorities.

I am so excited.  Thank you again, everyone, for your thoughts. What tipped the scales was 1) my son just loved the place, and 2) being debt free except the student loans was worth more to me than owning a house. I can't wait to write those checks!! 

What is going to happen is that I will sell, and pay off all the bills, and then start making money. And I am going to resist the lifestyle creep and start saving money. Goal #1 is saving 50% of what I earn. That is going to mean netting $7k/mo.  It is doable.

I am too excited to sleep.

I can hear the excitement in this post.  So happy for you!

[LouLou]

This was such a great thread to follow. Congratulations!

[MMMaybe]

All the best to you, Robin :)

[calimom]

What a great update ~ congratulations on all your progress! Looking forward to reading what you'll do next! Best wishes to you and your son.