Many people share the dream of owning their own home. But as most homeowners know, finally achieving that dream can also mean having high monthly mortgage payments as a result.
Factor in the other associated expenses, along with all the other bills you have, and money can get a little tight. Plus, a mortgage is usually the largest debt you owe. So, if you really want to be debt free, should you sell your home?
Here are a few things to consider before you decide to sell your home to pay off debt.
1. Smaller Payments
When the biggest chunk of debt you have is your home loan, it can be very tempting to try to get out from under it by selling your home. However, you shouldn’t make a decision with haste.
Instead, consider all of the factors and run the numbers before you pick up the phone to call or text your realtor. For example, have you compared your current house payment to what it would cost you to rent? Of course, the amount of a potential rent payment could vary quite a bit depending on whether or not you are also willing to downsize.
Additionally, if you are planning on purchasing a smaller home rather than renting, you may not eliminate as much debt as you think, especially if current home prices are high. It isn’t always a smart move to sell your home in order to reduce debt.
Unless you have no other choice, quality is something to consider when you are thinking about selling your home to get rid of debt. Does your current home have a lot of upgrades? Selling a nice home and moving into a rental could mean giving up many of the features you enjoy in order to reduce debt.
You should scope out rentals before you decide to put the “for sale” sign up in your yard. Many times the units available for rent are poorly maintained as well as outdated.
Be sure to decide if this is a big influencing factor for you and your family. Of course, sacrifices are often required in order to pay off debt.
Home maintenance is another factor many people consider when trying to decide whether or not they should sell their home to pay off debt. Even if you think you are going to save money in this area, that may not necessarily be the case.
If you decide to sell your home and buy a smaller one, you may still have to spend just as much, if not more, on maintenance. For instance, if your current home has been well maintained you may not need to sink much money into it for a few years. Buying a smaller home that hasn’t been taken care of could saddle you with home repairs shortly after moving in. Suddenly, you are right back where you started. You’ll have debt and high bills to pay for all of the maintenance and repairs on the smaller home.
You might automatically think moving to an apartment, rental, or smaller home will save you in utility costs. But again, that isn’t always the case. If your current home was built to be energy efficient, and you are using HE appliances, your monthly utility bills may not be all that much different even if you move to a smaller home.
When you are comparing the dream of home ownership with the dream of reducing your debts, take the time to think over all of the contributing factors. Don’t make a hasty decision that could cause you regret. There may be alternatives, such as taking on a roommate or renting out a portion of your home to bring in additional income. But, in the end, only you know if selling your home to pay off debt is the right decision.