Owning a home is one of the most sought-after achievements in America. For many people, homes represent the largest asset in their property portfolio and a sign of prosperity. However, owning a house also comes with a fair share of challenges. Keeping up with mortgages while meeting other financial obligations can be an uphill task. This challenge has forced many to take on more debts trying to save their homes. If you're one of them, chances are you've considered selling your house to reduce debt but haven't taken action because it's emotional.
Choosing to sell a house can be a tough choice. The last thing you want is to sell it and continue struggling with debt. To help you make that tough decision, here are a few things to consider.
Understand Why You're in Debt Before Selling Your House to Reduce Debt
Having debt is incredibly common in America. According to a report by CNBC, the average American holds over $90,000 in debt. So, if you're stressed about debt, you are not alone. Although selling your home might seem like your best move right now, it's not always a quick fix.
Financial experts recommend taking time to understand how and why you got yourself in such a situation before making any hasty decision. Studies who that many people get into debt due to:
Buying a Costly House
Many people end up buying houses they can't afford. This is because they based their buying ability on their credit scores and income at that time. Others got carried away by a house with extra amenities like big spaces outside, garages, and swimming pools.
Regardless of what pushed you to buy a costly house, you may have forgotten that finances change with time. And that's why you're in debt.
Poor Money Management
Apart from buying a house they can't afford, people also end up in debt because they have poor money management skills. They simply buy things because they can afford them at that time. While it may seem exciting, it's a sign that they're not managing money wisely.
If you're one of them, selling your house may make your debt crisis disappear only for a short time. Unless you address that concern, you risk falling back into the same situation after repaying your debt.
An Emergency May Force You Into Selling Your House to Reduce Debt
Not saving enough funds for emergencies can easily put one in debt. This is quite unfortunate since close to 50% of Americans don't have enough savings to cover a $400 emergency expense, according to a recent YouGov Survey for Economic Security.
If you find yourself in such a situation, tread carefully. Selling your house might seem like the right thing to do, but it isn't. Now that you know how and why you're in debt, use the following factors to decide whether to sell your home or not.
Your Home Value vs Amount of Debt
Owning a house doesn't necessarily mean you will make money if you sell it. The reality is that house sale proceeds depend on how much down payment you put in, how much you've paid off, and your home's current value.
It may be wise to know exactly what you owe. This will help you make sure your selling price will offset the remainder of your mortgage. You can get this information from your lender. If your home's resale value is less than outstanding balances, it may be wise to put off the sale.
Cost of Renting
Selling your home means you have to rent. And that is an expense you must consider before putting your home for sale. You don't want to sell your house only to end up struggling financially to pay rent. So take your time to do some research.
Learn More About Selling Your House to Reduce Debt
Selling your house to reduce debt can put you in between a rock and a hard surface. It can help you get out of debt if done right. We hope these tips help you make an informed decision. Good luck!