Selling Your House to Pay Off Debt

Paying off debt such as credit cards, payday loans or other lines of credit by selling your house could be beneficial if you are struggling financially.

Being in debt is incredibly stressful, often placing you and your loved ones under immense strain.

Depending on the value of your home, you could sell your property to assist with paying off debt and gain back some financial control. However, selling your house to pay off debt is not a decision to be taken lightly.

Should I sell my house to get out of debt?

Selling a house to clear debt - Should I sell my houseIf you want to stop house repossession, consolidate debts, or put right any other financial problems, receiving money quickly from the sale of your property can help.

Unexpected circumstances such as redundancy or unemployment, along with life-changing events such as a family death or a divorce, can place you under financial pressure. Even if you have money set aside for a rainy day, you could find that it isn’t enough. If you need a more permanent solution to paying off debt, selling your home could be the answer.

Should you sell your house to pay off debt?

If you are asking yourself ‘should I sell my house to pay off debt?’, you are actively trying to resolve your financial problems and that is a positive step.

Your home is often your largest asset, meaning it is worth more than anything else you own. While it may seem an easy way to raise a large amount of money in a short period of time, you should consider the long-term effects of selling your family home to pay off debt.

You will need to think carefully about your plans after you sell. Where will you live? Will you have enough money after the sale to purchase a smaller property, or will you have to rent/move in with family? If you plan to rent, will you have enough money for a rental deposit?

Good debt versus bad debt

When it comes to accumulating debt, some loans can strengthen your credit rating, whilst others have a negative impact on your financial record. For example, a mortgage is generally considered ‘good debt’, as the property value will, in theory, increase over time.

Student loans are also considered good debt, as education is thought to better your prospects and enable you to generate more income over the long term. Any loans taken out with low interest rates are also viewed positively.

Bad debt occurs when you use borrowings to purchase something that will not generate long-term income and will decrease in value. Payday loans and credit cards are examples of bad debt.

Things to think about before selling your home

If you are thinking of selling your home when paying off debt, there are other things you should think about when making your decision:

Do you have difficulty managing money?
Is raising money from a house sale a short-term solution to an underlying problem?

Are your financial troubles short or long-term?
Is your shortfall in cash caused by a sudden change in circumstance that can be fixed in a few months, or are you in long-term debt?

How much will it cost to sell your home?
You will need to factor in things such as estate agent fees, a conveyancing fee, the cost of any repairs required to make the house saleable, the cost of getting an EPC, and the price of removals. Some of these costs are payable upfront, others will eat into your profit margin upon completion of the sale.

How long will it take to sell?
What are the market conditions like in your local area? How about the condition of your home? You may want to sell quickly to alleviate money trouble, but this does not necessarily guarantee that it will be easy to find a buyer.

How much do you owe, and to whom?
Is there a way of restructuring the debt repayment to avoid having to take such a drastic step? For example, you may be able to enter into an IVA (Individual Voluntary Agreement); an agreement between yourself and your creditors through which you can manage your debt repayment.

If it is just your mortgage causing you trouble, you could speak to your lender about different types of mortgages and remortgaging or switching products to alleviate this stress.

How important is it for you to be on the property ladder?
If you sell your home, you may find yourself unable to afford to buy another property in the future. How will this affect your living situation?

Where will you live once the house has been sold?
How will you find this new home?

Would you consider selling your house if money issues were not a factor? Making the decision to sell could be a blessing in disguise by pushing you to examine whether your living situation is really as ideal as it could be?

Once you have considered these points and sought debt advice from family, friends or even an independent financial adviser, you will be in a better position to understand whether selling your property to pay off debts is the right route for you.

Paying off debt – using the money from your house sale

Debt free sign on old green doors.







Once you have completed a sale, you will have a lump sum that can be used towards paying off debt. You will need to look at how much you owe and how this is spread between creditors.

You should carefully scrutinize your monthly incomings and outgoings to see how much money you need to live each month; if you pay everything off in one go but don’t leave yourself with enough to live, you can find yourself borrowing again and getting back into a cycle of debt.

You can decide to pay off your debt in its entirety, or you can choose to pay off debts that have higher interest rates first. If the amount raised through the sale of your home is not enough to pay everything in full, you can reduce the debt with a lump sum and continue paying off the debt you owe in manageable monthly instalments.

Danny Luke, Managing Director of Quick Move Now, explains:

Rising living costs and low salaries mean that many people are struggling to keep on top of their finances. Often through no fault of their own. When you are already finding it difficult to make ends meet, an unexpected expense or illness can leave you unsure where to turn.

The Office of National Statistics suggests that as many as 48% of households are in debt. Being in debt can create a huge amount of stress and anxiety for you and your loved ones. Depending on your personal circumstances, and the value of your property, selling your property could help to ease your finances.

Quick Move Now have been trading since 1998, and in that time, we have helped over 5,500 customers by directly buying their properties in a timescale that cannot be matched on the open market.

Of course, selling your property to clear your debt is not a decision to take lightly. For this reason, Quick Move Now can offer a free, no-obligation cash offer to directly purchase your property.

We cover the costs of the house sale, so the offer we make you is the amount you will receive. This means you are able to do the calculations and see whether the sums add up for you.

What’s more, even if legal action is already progressing to repossess your property, it is possible to negotiate a halt to proceedings once you have accepted a formal offer from Quick Move Now. This can resolve the situation and avoid the long-term financial and personal devastation of repossession.

If you decide to go ahead with the sale, we can have the cash in your bank account in as little as 7 days, leaving you to move on and start afresh with financial freedom.



Will selling my home affect my credit rating?

While the sale itself will not necessarily impact your credit rating, any missed mortgage payments or defaults on the loan will remain on your rating for six years. Selling your home will not erase this from your credit history, and so even if you do manage to sell and clear your debt with the funds, your ability to buy elsewhere or to move forward with more credit could be hampered.

What do I tell creditors or debt collectors?

It is important to tell creditors about your difficulty keeping up with repayments as soon as possible. If you are planning to sell your home to raise the capital to cover your debts, you should provide your creditor with a copy of the valuation/estimated sale price and detail how much of that will be available to go towards repayments. Whilst you are waiting for your home to sell, you may be able to restructure your repayments at a lower sum.

How can I sell my home quickly?

If you are in a hurry to sell, you may choose to avoid the uncertain and time-consuming process of trying to sell a house on the open market. Instead, you could opt to place your home up for auction, or sell to a professional cash buyer to close the transaction quickly.

Selling home to pay off debt - What happens to my mortgage when I sell my house?

When you sell a property to clear your debt, you must first settle the remainder of the mortgage along with any fees associated with the sale of your home.

Can you sell your house before your mortgage term ends?

Yes - as mortgage terms normally run anywhere between 10 to 50 years, many homeowners sell whilst still within mortgage. You will need to use the sale of the house to pay off the remainder of the amount you owe to the mortgage lender, with the leftover capital yours to spend on debt repayment as needed. If you sell the house for less than is left on the mortgage, you will be considered to be in negative equity. The shortfall amount will still need to be repaid to the mortgage lender.

This content was written by Quick Move Now
Published on 2nd July 2016
Last updated on 10th July 2019