Q: We've grappled with job issues these last few years. We've been able to keep up with our mortgage payments but have had to use our credit cards and line of credit to make ends meet.
We aren't behind on our bills yet but the minimum payments get harder to make each month. Should we look at selling our home to pay down our debt?
A: There are a lot of things to think about when you're considering selling assets to pay down debt. You mention your home, but do you have a second vehicle, recreational property or any other assets that may be worth selling instead of your house?
Consider the implications of selling your assets - market conditions, contracts, tax implications, long-term family accountability and how it may impact any future goals or retirement plans.
As you look at your list of possible assets to sell or liquidate, keep in mind how much you would be left with after all is said and done.
If you were to sell your home, after you pay legal fees, a penalty on your mortgage, real estate fees, etc. would the amount you're left with be enough to eliminate your debt or would you still have a monthly payment?
On a line of credit or with credit cards, significantly paying down the amount owing reduces the remaining monthly payment. However, if you pay a lump sum against a loan, your monthly payment won't decrease unless you qualify for refinancing.
If you did sell your home, would you then be faced with high rent elsewhere or would you have enough left for a down payment on a more affordable home?
Depending upon your household income and the equity in your home, you may be able to refinance your mortgage and consolidate your other debt into a new mortgage with a payment that fits your budget.
This is a good solution, providing that you're able to meet your monthly expenses and set aside funds for seasonal and annual expenses without relying on credit.
Before making a decision, carefully review your overall financial situation: Your income, all of your assets and liabilities, your budget and what you anticipate your circumstances to be in two to five years. Seek reliable and objective help if you are not sure where to start.
Owning a home is an important goal for most people.
While money is tight right now, your home may play an important role in your long-term financial plans.
Selling your home to pay off debt may lead to a less-than-golden retirement in your golden years.
Scott Hannah is the president and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money, check nomoredebts. org or call (604) 527-8999.
Have a money question? Email provmoney@theprovince.com.
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