Does It Make Sense to Sell a House to Pay Off Debt?

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Debt can be a bear, but it’s a bear you can beat. 

If you’re like most Americans, your home is one of your largest assets. From the moment you were first pre-approved for a mortgage, you considered yourself a homeowner. Even if you hadn’t found “the” house just yet, you could picture yourself living in a home with your name on the deed.

However, you may now find yourself deeply in debt and unsure how you’re going to climb out, and wondering if selling your home to pay off debt is the right move. Here, we’ll examine when it makes sense to sell your home to pay off debt and when it doesn’t.

When it makes sense to sell

Few things in life are black or white, and that includes when it’s the right time to sell a home. However, if any of the three following scenarios remind you of your current situation, you may want to consider selling.

1. When you can’t pay bills

If you’re unable to pay all the bills included in your monthly budget, you know you’re in too deep. Further, if you can’t imagine a way to come up with the extra funds needed, selling your house could make sense. Before selling, though, make sure you have someplace else to live.

2. When your credit is taking a hit

Unpaid bills lead to a plummeting credit score. And as you’ve probably learned by now, your credit score is used to determine everything, from whether you’re eligible to rent an apartment to whether you qualify for specific jobs.

The goal is to carry a high enough credit score to make it easier to qualify for the things you want and need. Let’s say you’re just starting to struggle with bills and your score hasn’t taken a huge hit yet. If you can’t see another way to pay off the bills that are holding you back, it’s time to examine selling your home.

3. When your mental health is suffering

According to the American Psychological Association (APA), money is the top cause of stress in the U.S. If you find yourself constantly on edge about your financial situation or fighting with your significant other over money, it’s time to slow down and determine whether owning a home is worth the suffering.

Look around to learn whether there are other, less-expensive homes in your area for sale or rental properties you can lease until your finances are in better shape.

Nothing is more important than your mental well-being — even a house.

While it’s a tough time to purchase a home, it’s still a seller’s market in most parts of the country. If you can sell your home and walk away with enough money to pay off your existing debt, you just might end up with a clean slate.

When it doesn’t make sense to sell

While selling your home may be the fastest, easiest way to pay off debt, it’s not always the best choice. Here are three instances when it may pay to stick around.

1. When there’s light at the end of the tunnel

If you’re still able to cover your bills with a little left in your bank account each month, you have enough breathing room to take a deep dive into your next best move.

Sit down and crunch the numbers. Figure out if there’s a debt payoff method that will work for you. If there is, you might want to hold off on selling.

2. When you have a plan

Let’s say you choose a payoff plan like debt avalanche. You decide that it’s feasible to turn your favorite hobby into a side hustle that brings in enough each month to pay extra toward your debt. The fact that you have a plan is a good sign. That means you’re actively seeking ways to rid yourself of debt while keeping your home.

It makes sense to give yourself time to ensure your plan works.

3. When it would disrupt your family

If you live close enough to work to walk, or your kids are in a school that meets their needs, moving can be tough. Unless you’re sure that uprooting your life to pay off debt is worth the trade-off, hold onto your home until you’re certain.

Debt stinks, but it’s not the end of the world. Millions of Americans have discovered ways to cut back on unnecessary spending and focus on paying off debt. It’s not easy, but it will be worth the effort.

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