Owning a house is one of the biggest dreams whether that is bought out of an individual’s savings or got inherited. If the house got purchased out of combined sources of savings plus loans borrowed from financial institutions, the issue may implicate different scenarios.
Irrespective of its background, a house is always considered an asset under any given circumstances. It proves worthy especially when you are in trouble facing heavy and continued debts in the market, maybe in the form of educational expenditure, inflation pressures on the living costs, or other hidden expenditures that can’t be compromised.
The financial planning of every individual will differ depending on the income and expenditure along with support systems in times of emergency. For example, Mr Tom may be earning big money but a spendthrift and impulsive in buying anything that he feels like. Soon his income will get exhausted more than budgeted and he is likely to be in a financial crunch. Ms Susan earning mediocre but meticulous in planning her financials and uses credit cards with utter discretion and care. She doesn’t believe in accumulating debts and rather parks extra income in fixed deposits and stocks frequently. If we compare both individuals towards financial behaviour, the former proves careless and the latter is more futuristic.
Another more profound example that I have come across in the recent past is that Mr Hanson who was a Senior Analyst in one of the top Insurance companies, with a package of $180,000 per annum, bought a house in Atlanta through savings and loans. He got married to another Software Engineer and was in a more comfortable position both financially and physically. Suddenly, he was diagnosed with Lever Cancer and had to undergo treatment. He lost his job and his wife had to take a sabbatical and support him during this period of hardship. Soon all their extra funds got exhausted including fixed deposits, and stocks they invested in the market. They were left with only option to dispose of the house where they were living. It was a tough and inevitable decision to sell the house to meet the increased medical bills despite having insurance. They moved to rented accommodation nearby and sold the house on an as-basis duly after having a dialogue with one of the local agents. Since the deal was in distress, the yield was not as expected and had to compromise by clearing the debts but continue to face the troubles of new debts for their survival. The debt trap is like a vicious circle, the more one wants to break the shell, the more he or she will get clutched.
Thus, there is no straight jacketing solution for individuals with neck-deep debts, simply manage them through extra income sources and jackpots, instead of banking on the sale of the house and clearing the debt. Nevertheless, the house can be sold to clear the debt, either by downsizing it or selling some part of it instead of total disposal. Because, owners may feel relieved temporarily after clearing the dues, but soon will have the pressure of looking for alternative housing. If rent or lease is chosen, then the burden of increased rental values from time to time may again add to the headache.
Outright sale of houses to clear the debt could be thought of as a better solution only when such houses fetch good yield so that after clearing all those accumulated debts, owners must be left with sumptuous funds to buy an alternative house. If this does not work out ideally, the situation may temporarily be okay but eventually will trouble them due to the increased burden of rental or lease values, along with other physical and mental compromises.
So ideally, a proper cost-benefit analysis of the post-sale situation must be done by individuals who are at such crossroads, along with the help of financial and property consultants who can advise better through their critical analysis.