I am glad to hear you are able to make a dent in the debt — from personal experience I am sure getting out of it will enable you to improve your life without endangering it.
And I totally understand about the heat — I like a little of it myself, as where I live it hardly ever gets warmer than 25C (77F) for a few days in summer, but having returned from a vacation in Barcelona just now, where it was the everpleasant 30C(86F), I can attest that it is bearable only, if you can afford to dip into the sea or shower at least couple of times a day.
However, the apartment size is something I feel is so much of a matter of expectations based on prior experience.
I myself am from Eastern Europe, reasonably well off, and live in around 700sq ft with my wife and a toddler. A bit too cramped, as my older son comes over for about half of every month, but certainly livable.
And then I go visit my brother (MD) in London.
And wonder at the tiny tiny rooms in the city. I have visited him several times in different apartments, since he moved there, and he always lives in around the same 400sq ft as you, just with his wife and 3 kids. And as far as I can see vast majority of the Londoners do the same, still they seem to manage quite allright, I assume mostly because they are used to it and do not have the same expectations on the size of their living space as I do. Perhaps their ability to carve a large *number* of actual rooms out of the very same 400 sq ft and divide them into 2 floors, helps.