The journey to financial freedom is typically a challenging one. While not easy, it’s a worthwhile endeavor because, on the other side, you’ll find complete control of your finances and the ability to take charge of your own destiny. The first big step is…eliminating your debt.
Of all the factors that can sabotage your financial journey, debt is the trickiest. It holds you back from being able to do the things you really want and requires a financial commitment to meet minimum payments. When your debt has become a burden, it can feel hard to stay on top of it all, let alone plan for the future and grow your savings.
Financial freedom opens doors, but how is it even possible for people who can’t get their debt under control? Sometimes, getting ahead requires something drastic. It’s not unheard of for people to consider selling their home, using the proceeds to pay off their debt, and declaring it a fresh start.
But how do you know if it makes sense to cash in your home’s equity for the chance of being debt-free? Is there a cost to being free from unsustainable monthly debt payments?
If you are considering finding someone to buy your house anywhere from Orange County to Washington, D.C., some factors will help you determine if it is the right decision.
1. Determine How Much You Will Make From the Sale
The first step is to do some math. You need to know how big of a dent selling your home will make on your debt and if anything will be left for a downpayment on another home. Meet with a realtor to discuss the numbers and get a realistic perspective of your home’s worth.
Here are some questions to ask:
- How much will it sell for?
- What are the costs of selling?
- How much will the check be on closing day?
- What do all of your debts add up to?
- How much money will you save monthly by eliminating payments on your debt?
You want your numbers to be as accurate as possible. Once you have them, it’s time to draw a line in the sand. You will have an estimate of exactly what you stand to gain by cashing out the equity in your home. This will allow you to make an informed and realistic decision to get over the debt hurdle and get back to a sustainable place financially. If the numbers make sense, selling your home to pay off your debt will be a significant step toward financial freedom.
2. Analyze Your Housing Options
The next major consideration is where you will live next. You’ll have to make some decisions before listing your home so that you can factor your new living expenses into your financial equation.
- Are you planning to buy again?
- Can you downsize?
- Would you prefer to rent for a while?
- What will it cost you to get into a new home?
Finding a solution for what’s next that keeps you on budget will determine whether this makes sense.
People living in an area with high rent payments or facing inflated mortgage payments due to high interest rates might find that it’s not the right time to try and sell.
Conversely, if you bought too much house and are struggling to keep up with your mortgage payments, selling your home to dig out of debt is a no-brainer. You’ll be free from unsustainable mortgage payments and have the cash to pay your debt obligations.
Whatever you plan to do next, ensure the payments fit comfortably within your budget and choose something that supports your long-term plan for finding financial freedom.
3. Weigh the Emotional Trade-Offs
Finally, you want to consider the emotional aspects of selling your home. It’s no secret that we all develop emotional ties to our homes. This can be the biggest hurdle to selling. But it’s a hurdle that you can overcome.
Few things feel as good as financial freedom. While parting with a place full of memories can be tough, a cash sale offers a quick, hassle-free transition, allowing you to focus on the future rather than the stress of traditional selling. And those memories can always come with you, providing a strong foundation for your new start.
Is selling your house to pay off debt always the answer? No. But if you’re prepared, selling your house for cash can be an incredible tool for leveraging your wealth to achieve the life you want. You can find confidence in your decision by relieving your financial burdens and focusing on all the possibilities in your future.
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Infographic
Selling your house to pay off debt can be a powerful financial move, but it’s not always the best choice. This infographic highlights three key factors to consider before making this decision.
