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We Sold our House to Pay off Debt. Here’s Why!

We Sold our House to Pay off Debt. Here’s Why!
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We did it. We paid off all our debt. After years of watching our debt creep up and then slowly back down again (rinse, wash, repeat), we finally nipped it in the bud completely. In one fell swoop, we went from indebted to creditors to financial freedom. And you know what? 

It feels amazing.

We Sold Our House to Pay off Debt

But although we were going about it the traditional way (with a strict budget and the use of cash envelopes), we ultimately chose an outside-the-box method for paying everything off.

We sold our house to pay off all our debt.

Does that idea scare you a bit? It scared us! It took us nearly a year to make the decision to act on an idea that was first sparked when we realized we had enough equity in our home to give ourselves a fresh start and then some.

We didn’t make this decision overnight. We hemmed and hawed and stewed over it for months. But ultimately, it felt right for us – and several months later, we have no regrets and would do it again. 

I thought I’d share this post in a sort of FAQ format, since we do get lots of questions about our choice to sell, pay off debt, and become renters. If you have questions, please feel free to leave them in the comments below!

How did the idea to sell your house to pay off debt come about?

We have been budgeting for years. You can join my 60 Day Budgeting Challenge here to learn exactly the process we use (it’s free!). Athough we were paying things down, it was slow going. Especially considering we run a small business and are responsible for our own paychecks each month. The planner business is very seasonal and spring and summer are very tight financially. Even when we had a “good” month, we felt restricted by debt (imagine how free you would feel if you could wipe away a car payment!). 

When friends in our neighborhood started selling their homes, we took a look at what our home was worth. We’d been in it for almost seven years and the value had gone up quite a bit. We realized that we could sell it, pay off all our debt, and fund an emergency fund. In addition to that, all of the money we spent each month on debt would be freed up to go into savings for a more robust emergency fund and then, savings for a down payment on our future “forever” home.

Emergency Fund

But even then, it wasn’t easy. I was scared to sell and go from homeowner to renter. We liked the idea of owning our home. It made us feel in control, and if we stayed in our home, the value would hopefully only increase. So we went back and forth for months.

Finally, we decided that financial freedom was worth giving up some of the independence of home ownership (and as it turns out, renting makes us feel freer than ever!).

Why didn’t you just stay in the house, keep paying off debt, and then sell it and use that as a down payment when you were ready to move?

This was a constant question we asked ourselves. Would it be better to just stay put, pay off our debt, and then sell and use that money for a down payment on the next home?

Debt-Free

Maybe. It certainly would be what we were doing today if our home value hadn’t increased so much, or if we felt especially tied to that home. 

But we were ready to just cut off the debt completely. The housing market here is hot, and we felt fortunate that we could sell quickly and give ourselves a clean slate.

Was it hard to go from being a homeowner to a renter?

No, no, and no again. 

For one thing, our neighbors and close friends – who lived next door to us – were moving and planned on renting out their house. So we snagged it! We literally moved next door, into a very similar home. 

Renter

That was incredibly convenient, but not a deciding factor. There are lots of homes available for rent in our community, so we knew we could find a place and stay in our neighborhood – the kids didn’t have to change schools, and the disruption to our lives was minimal (except the part where I have to explain to everyone that we moved next door…ha). 

For us, renting is freeing. We’re not paying HOA fees. If we get stuck in another hail storm, we don’t have to deal with the insurance company to repair the roof. When we’re ready to move, we don’t have to go through the process of selling a house. After years of home ownership, hail storms, foundation issues…renting feels easy and I am ready to stay a renter until we find the home we want to call our own until we retire.

I didn’t feel burdened by our home…but I feel freer without it. If that even makes sense?

Would you recommend selling your house and paying off your debt to everyone?

I would not recommend this to anyone, but I also wouldn’t not recommend it. This was a very personal decision based on our experiences, our finances, and our goals. 

One thing we talked about – a lot – was how we’d feel if we sold the house, paid everything off, and then found ourselves back in debt again…and renting, with no equity to fall back on. 

Dolla Bills

We decided that our financial habits have changed permanently. We’ve proven to ourselves over the years that we know how to budget and we know how to maintain it. Ten years ago, I don’t think this would have been the right choice for us. I kind of feel like the stars aligned in order for this to happen.

I have had a couple of people tell me they’ve done the same thing, though – so I know this isn’t a new idea, and I know we’re not alone!

When will you buy a new home?

Our original plan was to build up our emergency fund and save for 1-2 years until we have enough for a down payment on our next home. But honestly, though? This debt-free life is for me. We might wait a little longer until we can pay cash for a home, or at least make a very large down payment. Or maybe something will hit (like planner sales will take off…ya never know!) and we’ll be able to do it sooner. 

Right now, we are open to anything timing-wise, but know for certain we won’t be making a move until we are 100% ready. No rush!

Piggy Bank

Here’s what I do recommend, no matter what your situation, if getting out of debt is your goal:

  • Be creative – think outside the box when it comes to bringing in new income to pay off that debt.
  • Be consistent – if you are consistent with your budget and paying off your debt each month, you’re going to see progress.
  • Think long-term – although we had one car payment, I am super grateful we chose not to replace our hail-damaged car with a new one. Instead, we chose to keep it and drive it until we can afford a new car. It’s so easy to get wrapped up in “new car smell” (or wanting a bigger home, or splurging on a vacation, etc.). If you can think a little further out than how you’ll feel driving off the lot with that new car, I think you’ll find yourself making choices that will cost you less!

Today I am enjoying our debt-free life. We still have a budget – a super strict one, actually. We don’t want to mess up what we’ve created, and it’s super important to us to save right now. With one exception – we moved my horse to a local boarding barn – our lifestyle is exactly the same as it was before, if not even a little tighter. Because ain’t no way we’re going back into debt, y’all.

Coin Purse

And that is our debt-free story. I was reluctant to share it because it’s so specific to our situation, it’s not really something everyone can replicate. But maybe it will get some ideas flowing or spark something that will help you out if you’re aiming to be debt-free, too.

Questions? Let me know in the comments below. I’d also love to have you join me in my 60 Day Budgeting Challenge – you can learn the exact system we use, and I have a super supportive Facebook group you can join to go along with it!

 

 

Copyright: feverpitched / 123RF Stock Photo

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Thanks for sharing. I feel this is an option for myself and my family and this has been reassuring.

Oh my gosh! This is exactly what we are doing. Our timelines and everything is spot on. I’m so tired of being stapped with debt. The fact that I’m also a small business owner really resonated with me. I would love to hear more about your story. I would also like ask some follow up questions. Thank you for sharing!
Madison
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@esthetics._by_madison_manning

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Was it difficult buying with higher interest rates and more expensive homes. I’m thinking of doing the same thing neat Atlanta but the prices of homes keep going up and if I sell I’m afraid I will not be able to get back into the housing market.

we just did the same thing. Our house closed July 23rd. Did you pay down all your debt at once?

, what do you mean by this? I dont have an accountant….why would it matter if I paid it all off at once or not?

My husband and I have been discussing this exact thing over the past month. The housing market in our are could let us potentially net 40% profit over what we paid for our house just 2 years ago. It would wipe out every debt. I am tired of home ownership quite honestly.. always something needing repairs, updates etc.. The personal stories ai read here are very inspiring and reassuring!!

OMG, this feels so amazing knowing I am not the only one doing it, this is our exact situation, we can slowly pay off debt but not sure if it worth it, debt free, a fresh start, a better financial plan to reach your goals is the perfect scenario. Thanks a lot for sharing this journey.

@Edgar,
Curious, how long would it take you to pay off debt if you didn’t sell? I’m 5 years away from paying off my student loan debt. And things have been tight for me. I have an old car that can go anytime.

I’m in this situation right now. My house is valued at about $150-160K over what we owe on it. We are thinking about selling, paying off our two car loans (about $55k total) and two loans (about 18k) & putting the rest away to go towards the down payment of a future home. I’m so nervous to go from owner to renter, I feel like I shouldn’t care about that but I do. I’m in Texas and the current housing market is insane. It makes me nervous for when we are ready to buy again, that houses will still be over-priced & interest rates will still be high. I’m glad to see there are others out there who have done this, it feels really risky!

[…] few years ago we sold our house to pay off all our debt. It was a great chance for us to start fresh with our finances. The timing was perfect, as our […]

Hello Carrie. I purchased my first home with first time home owner credits and down payment assistance in the Fall of 2021. Now I have about $45,000 that I could net after selling literally this month (before the lower comped house down the street gets sold). I am considering moving back to Seattle to work for my former employer, whom I loved working for previously to avoid paying Capital Gains Tax. Even though my bags are all packed and ready to go. I have huge trepidation for doing this. It almost seem like a no no. I worry about the home values going up so high in a few years in Atlanta that even when I save with no debt I will not be able to afford another home again. Also this feels incredibly irresponsible to me even though paying off all my debt is responsible. I plan to return back to Atlanta in some years to buy something I feel more comfortable living. The neighborhood I live in nice but people have recently shot out the window in my car and have tried to break the lock on my door. I would like to wait to buy something somewhere I feel more comfortable living. I would feel like a fool if a major development would be built near my home that would cause property values to shoot up, but I can’t find any soon. Please let me know what you think of this and if you see any reservations in what I’m doing. I am a single male.

P.S. No rush, but the sooner the better as I make my decision this week.

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“But as soon as we sold and paid off that debt, it was a major pressure release. We rented for over four years and waited until the stars aligned before buying again. I am so, so glad we did. We got out of messy debt, saved money, and bought the house we really wanted and love.”

Carrie, I loved this part. It was very reassuring.

I’ve got a buyer. Got another job in another state lined up. All I’ve got to do is sign and $30K of student loan debt gone. All I need is the courage.

I am closing on my first home in 2 days and I am not feeling so good about it. I don’t know why but this all felt like a good idea months ago. Can anyone help me with some postpartum advise for getting over this? I fear I’ll never be able to own another home again. But do really want one? I’m not sure. I stand to gain $50K.I’m thinking of using some for the down payment of another home and about 10K to pay down student loan debt, decreasing my monthly payment down $250.

@Steve, somewhere earlier in this thread Carrie said that she thought maybe the home ownership idea was just a fallacy fed to us by banks and construction companies. I am strongly considering selling my home and renting another one. And possibly not EVER buying another one. Home ownership is a lot of headache. I think it depends on if you are trying to build wealth for children or not. If not, who cares what equity you have in your home when you are dead? (sorry to be so blunt) If you do have children, then you need to take their future in to account. In that case, buying another home to build wealth for them in the future may be a good idea. I say sell the house, be debt free, save some $$ and see how you feel in 3-5years. You can always change your mind!!

[…] We Sold Our House to Pay Off Debt […]

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