2022 – We’re Tired of Rising Mortgage Costs – What’s the Best Way to Pay Off Debt? | money

s We are tired of rising mortgage costs and want to pay off our debts, and the sooner the better. We are happy to downsize and simplify our lives to make that possible.

We have two properties, an undamaged flat worth £43,500. We can’t live on this property as in a different city, too far from where we work. It also needs some renovation.

The other property we live on is mortgaged and worth £174,000. We still have about £73,000 to pay off.

What is the best course of action? Selling both properties and trying to find a cheaper property with the proceeds? Or sell the less valuable property and use the money to reduce the mortgage? RB

a If you were to sell both properties, you would be mortgage-free and have just over £142,000 (after paying off your existing mortgage and assuming you’ve paid the 1% estate agent fee plus VAT). You may also have to pay stamp duty, transfer costs, and other fees associated with the purchase.

So my question to you is: Will this be enough to buy a property in an area where you would like to live? And do you have the money to pay these costs on top of that? If the answers are no, you will need to top up your £142,000 with another mortgage to buy a suitable home and I will be inclined to take your second option.

Selling the home as is will cost you less than £43,000 (after agents’ fees) so you can mortgage the home you live in for as little as £29,900. What I won’t do is spend money renovating the house before selling it unless a real estate agent tells you that work is necessary to make the house salable.

If you decide to sell the home and use the proceeds to reduce your mortgage, it also makes sense to see if you can reduce mortgage costs by consolidating your debt with another lender. It’s also worth asking your current lender if they can get you a better deal – especially since your mortgage will represent less than 20% of your home’s value.