Should I Sell My House to Pay Debt?

Are you wondering if you should sell your house to pay off outstanding debt? You’re not alone. When times get rough, credit cards are maxed out but debt payments need to be made along with everyday life expenditures. Many people consider selling their Flagstaff house as a last resort to get back on track with finances. Whether or not selling your home to pay a debt is a good idea depends on your individual situation. There is no rule of thumb or straightforward yes or no answer when it comes to making the decision to sell your most valuable asset to pay off debt. However, there are aspects to consider that can help make the decision easier for you.

This blog will help you understand why people consider selling their homes to pay off debt. While not uncommon, selling your house to pay debt shouldn’t be an impulse decision. If you’re actively considering selling your Flagstaff home to get yourself out of a precarious situation, the advantages, as well as the disadvantages, discussed outlined below may help in creating your own pro’s/con’s list. We conclude this blog by examining scenarios that provide a reason to sell your Flagstaff home. However, before you jump to a conclusion, our Best Flagstaff Homes Reality team can help you crunch the numbers to support you in making the right decision for yourself and your future.

Why people consider selling their homes to pay off debt

The feeling of having debt can be extremely overwhelming. For many homeowners, their house is their biggest investment. Therefore, it’s understandable that when money gets tight and it’s a stretch to make debt payments every month, the first thought is, “Should I sell my home to pay off debt?” What’s often not considered are the long-term benefits and security that owning can house bring, not to mention the equity involved. Consequently, we always advise clients to tread carefully and consider different perspectives before making any premature impulse decisions.

Selling your home to pay off debt may seem the simplest solution to an intimidating problem. However, does the math add up? It may make sense to sell your Flagstaff home if you have enough equity to truly pay off your debt. In many cases, however, owning a house is not the sole cause of a bad financial situation. In the following sections, we highlight the importance of understanding where debt comes from. Whether it’s student loans, car loans, general overspending, medical bills or other factors that contribute to the debt, only if people really understand what happened they can effectively combat and find solutions to their problem.

It’s quite common that people solve their short-term debt problem by selling their house. Yet, a few years down the road, if their financial habits don’t change, they can find themselves in a similar situation without equity to fall back on. Therefore, it may be smarter to consider alternative options and consult with a financial advisor before listing your house for sale. The following benefits and drawbacks of selling your house may help you to get a clearer picture of how to proceed.

Benefits of selling a home to pay off debt

If you’ve lived in your house for many years, it’s safe to say that memories are tied to every corner of the house. Selling a home to pay off debt is a very personal decision that can take an emotional toll on everyone involved. Nevertheless, there are also benefits to selling a home to pay off debt. If your heart is not necessarily set on owning your own four walls or you are ready to downsize, renting may be an alternative worth looking into. When it comes to renting in Flagstaff, it really depends on the neighborhood, but rent as well as buying a house can be equally pricey. Consequently, we’d advise you to crunch the numbers carefully as renting may seem appealing in the short-term but owning can be a profitable long-term investment.

If you acquired your Flagstaff home after the recession and bought it for a good price, chances are you can sell your Flagstaff property for a profit. Property values have been continuously rising in Flagstaff and we’re currently in a seller’s market. This means that demand for houses is high, inventory is limited, and sellers have the ability to set high prices for their houses for sale. Therefore, if you’re actively looking to sell your property, let us help you assess the market value. If your house is worth more now than what you paid for it, you have more equity in it, which means you can sell your home for a profit and potentially pay off outstanding debt.

Drawbacks of selling a home to pay off debt

A common misconception is that people think when they sell their home, they’ll make a profit. There are a lot of factors that weigh into how much a home is worth and how much money you can expect from selling your home. Firstly, it’s important to consider how much money you put down on the house initially, how much of your mortgage you’ve already paid and how much your house is currently worth. Overall, a home value equals however much someone is willing to pay for it, but it also depends on the current state of the Flagstaff real estate market, neighborhood, condition of the house, and more. If you consider selling your home to pay off debt, you want to make sure that you know exactly how much you still need to pay on your mortgage to make sure the sale of your home can cover the payoff amount. If the payoff amount is higher than your house value, selling your house to pay off debt will do you no good as it simply wouldn’t be feasible.

Furthermore, the process of selling a house is not free, especially if you’re looking to sell your house fast. In addition to the payoff amount, you can expect a sum of fees, such as escrow, interest, sales taxes, insurance, third-party, and more. The closing fees vary based on location but typically range between two and five percent of the home value. On top of that, add real estate commissions and include any costs that you may encounter when fixing up or repairing certain areas of your house prior to selling.

The financial drawbacks of selling a home can be so significant that it’s not even worth selling one of your greatest long-term investments to pay off debt. At Best Flagstaff Homes Reality, your REALTOR® can help support you through the evaluation process of whether it makes sense to sell or whether refinancing is the more sustainable option.

Common reasons you should sell your home:

Besides the previously discussed advantages/disadvantages of selling your home to pay debt in Flagstaff, there are four other situations that make it worth considering selling your house: You can’t afford your mortgage, your home is falling apart, you start to notice a change in the market or a personal life event happens that changes your plans. While all of these situations can be a reason to sell your home, it always depends on your personal circumstances and if you really want to sell. If you’re already living in your dream home and you don’t want to sell it unless you really have to, there are always alternative options that can help your situation, such as refinancing your Flagstaff home.

You can’t afford your mortgage

Mortgage payments can be daunting, especially if they are more than you can afford. It’s not an uncommon scenario. Who wouldn’t be tempted to go after their dream house even if it’s slightly out of the price range? You found yourself in this situation where your mortgage was determined based on your income and credit score and is now too much to handle? The key here is to be proactive and speak to your mortgage servicer right away to avoid foreclosure if you don’t have enough funds to make your regular payments. If you really don’t want to part with your current home, an alternative to selling is to refinance it. To do so effectively, you need to set clear financial goals, determine your existing equity, and be aware of your credit score and credit history. When you shop around for lenders, be prepared to be transparent with your financials. This is because refinancing your home essentially means that you’re taking out a new loan to pay off your existing mortgage.

There are two primary advantages to refinancing: First, you can take advantage of lower market interest rates and, second, you can set up a lower your monthly payments by committing to a long-term payment plan. However, if you’ve already decided that keeping the house is not worth it to you, you can always look into renting and sell your house to pay off the existing mortgage.

Your home is falling apart

If you’re considering selling your Flagstaff home because it’s starting to fall apart, you should ask yourself a few questions before making any decisions: What are necessary repairs that should be done prior to selling the house? Are there any improvements that can be made to elevate the property value for selling? What are the costs for any repairs done pre-sale? Is your home located in a desirable location?

If your house is falling apart, yet is located in a desirable location in Flagstaff, it is highly likely that you can still sell your house at market value and make a profit (depending on your mortgage circumstances). If your house is located in a less desirable location, it may take a longer time to find an interested buyer. This wouldn’t necessarily help your immediate debt situation, yet, it may still be worth selling depending on how much repairs will cost you in the long-term. Consult your REALTOR® to assess the property and inquire about necessary improvements before putting the “for sale” sign in the yard.

You start to notice a change in the market

In general, if you are considering downsizing, or if you’re ready to move anyway or want to rent instead of own, you should watch the market closely before making any moves. At the moment, Flagstaff real estate is in the state of a seller’s market. That means that due to the high demand for houses in Flagstaff, sellers have the opportunity to drive prices up and keep prices consistently high. If it makes sense for you to sell your home, after having done the math, and knowing that you will be able to pay off debt, we recommend evaluating the market and making an informed decision by consulting your REALTOR®. It’s important to know what’s going on around you.

Since Flagstaff real estate market has been booming for several years, critics wonder when the bubble will burst. Be prepared. Ideally, your house should hit the market during a high demand period, such as during the summer months in Flagstaff. Furthermore, the continuous construction of new apartment buildings and housing opportunities affects the real estate market as well. Therefore, we suggest that once you notice a change in the market, give our Best Flagstaff Reality team a call and we’ll guide you through the selling process.

Change of life event

Whether expected or unexpected, life can change every day. The best scenario is that you’re planning on moving anyways. Maybe your youngest is about to graduate and you’ll be an empty nester soon looking to downsize. In that case, it could make sense to sell your house and pay off debt. Downsizing also reduces monthly upkeep and service expenses, giving you another opportunity to save money.

If you find yourself in debt because of an unexpected incident, the thought of selling your home may feel like the only option. Proceed with caution. There are alternatives to getting your debt under control. Take time to consider the potential long-term asset you’re willing to let go to solve a short-term problem.


If you’ve done the math and could, in fact, sell your home to help cover the debt, the main question remains: Do you want to?

If selling your home is your last chance to get back on track with your finances, but it would be hard on you emotionally, there are other ways to change your financial habits that will help get your debt under control. You can consult a financial professional about the other options available to you.

A key to getting your debt paid off is to understand why you’re in debt. That will help cut back on impulsive spending (including halting your credit card usage). It is always a good idea to create a set budget. Also, depending on the type of debt you have, you may want to consider consolidating it to reduce the interest accumulation. Before you make any life-changing decision, give our Best Flagstaff Homes Reality team a call at 928-714-0001. We can help you answer key questions about selling a house in Flagstaff as well as what you can expect from renting here. To make the best-informed decision for your future, we can help you determine the market value of your house.

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Flagstaff, AZ 86001
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