what on earth to do with inheritence?

[marymaryquitecontraryusedtobeafairy]

I've been left a house which to sell now would bring me about 80K in the bank.

I'm poor. I bring in about 24K/year, and am in masses of debt. I just survive. I'm a mum and I work and get benefit top ups. I'm council housed in a dire part of the country, the house is in a slightly better area but I don't wish to uproot myself and children from school and home.

What do I do? Can this help me get out of the poverty trap? Do I live off the money? Live in the house and enjoy a secure home but remain in poverty? I can't afford to do the house up but can I possibly buy a very cheap or auction place, do that up and start flipping houses as my main income?

Look I'm not that bright but I've worked hard all my life and it's just not good enough financially. I decided to be a care worker because I enjoy it but the pay alongside the increase in prices has crippled me and there's no way to get out of it so I just trudge on day by day. I'm not miserable nor are my children but I don't want to waste this opportunity.

I don't have money for a financial advisor right now nor time to research so I'm hoping you clever and wealthy lot can help me out a bit with pointing me in the right direction.

Thank you.

This is very good advice, OP.

May I acquaint you with this place called the north of England? Or Wales?

I mean, no, you can't get a spectacular house for 80k, but there are plenty available nationwide in nice enough places, 3 beds, no significant work needed.

People don't snap them up because they're not that desirable, but there's nothing particularly wrong with them. Haven't you seen any responses on here when people suggest relocating away from their support networks etc?

Unfortunately 80k doesn't stretch that far but it will certainly help you. In your shoes I would:

1. Clear the debt
2. Put 10k in an ISA as an emergency fund
3. Use the remainder for a deposit on a house or flat - it won't be a palace for 120-130k (based on current earnings) but the mortgage should be affordable and manageable. Can you buy your council house?

I don't think re-training is viable right now but if you had these things in place, and only a small manageable mortgage, it opens up the possibility of being able to fund part-time training or remote learning classes later.

If I'm right in saying this, even holding onto the house without selling it or living in it or renting it out can affect entitlement to benefits. This is a problem some women run into when leaving a partner who refuses to budge from the family home - it's seen as a source of capital even though you aren't living in the bloody place, and DWP may insist on a buy-out or sale, or you may not be eligible for some or any forms of UC. I think there is a certain grace period, but after that you need to be careful. You will have to make a decision one way or another.

@PilsAwfulDilemna see I never even thought of running a shared house.

There's a large lounge, nice kitchen area, garden, and three bedrooms.

So I would rent each one for around £400 and work and do quite well out of that.
Thank you.

This would be a good idea and maybe some therapy or something to get your mindset off the “I’m stupid, I made bad choices, I can’t change”.

It would be very easy to blow the lot but don’t do that.

From my experience of inheriting a house I would say the following;

1. don’t rent it out. I spent a lot of money as the tenant didn’t pay rent for 6 months and I had to pay for a court order to evict them. And this was through a managing agent.

2. don’t sell it to buy another house. I spent sold it once the tenants were moved out and bought a flat. I spent about £10-12k in moving fees.

I should have just moved in to it and got on with it. I could have afforded the bills, not much else, but at least I wouldn’t have spent money I didn’t have. Which I am now still paying off a decade later.

This is probably a once in a lifetime opportunity, do not waste it.

If inflation is 8% then in one years time that £80k is worth £73,600.
If that stays then in two years time it will be worth £67,712.

What you want is for the £80k to grow and not be “penalised” for it.

What is the interest rate on your debts?
If it is less than 6% then keep the debts.
If it is more than 6% then keep the house, move into it, get a mortgage for £20k and pay off the debts. Your mortgage might be about £140 a month, depends how long you want the term. Most people would jump at the chance of buying an £80k house for £140 a month.

That house might be worth £88k in two or three years time.
When you retire it will be worth more than £200k.
This could be a leg up you leave for your children when you pass.

There may be one more option for you, and that is to get as much of it put into your pension as possible. You could sell the house, pay off the debts, and increase your pension contributions to 80% of your earnings (£19,200), the government would then add £4,800 tax relief so you have £24k in your pension. Whilst putting all your wages into your pension use some of the house sale proceeds to live on.

So for the first year you pay off £20k debt, put approx £20k wages into your work pension, and use £20k house proceeds to live off (in place of the wages).

Of course you will lose benefits however much that is so you will need to factor that in, let’s assume you get £10,000 a year in benefits. So you need to use a further £10k of the house proceeds to live on.

After 1 year you will have £40k left, so you again put 80% of your wages into your pension and live off the house proceeds. So after 2 years you have £10k left. You could have used this in the 2 years for a few luxuries / holidays / house improvements or just put it into your pension in the 3rd year.

You can then claim Universal Credit again but have £48k in your pension but have “lost” £20k of benefits but gained £8k in pension Tax Relief so only £12k “down”.

£48k in a pension with an average stock market return will double every 10 years, so also be over £200k when you retire.

You could maybe even do hybrid by putting it all into a pension in one year but lose the tax relief on non-employment contributions. So you stop your UC claim and payoff the debts. You work and put £19,200 earnings into your pension and it gets topped up to £24k. You can also open a private pension (SIPP) and put in the remaining £40k. So you have no debts and £64k in your pension. Then after some months you claim UC again. I don’t know how many months you would have to wait though to side-step the deprivation of capital issue.

Pensions historically have grown more than housing, but you can’t live in a pension and you will lose the benefits this route so on balance I think keeping the house and getting a small mortgage on it would be the sensible thing to do. The pension would be the best thing to do if you were not on benefits.

One last point… if you are earning £24k you will take home about £1.7k a month, and if you do get £10k benefits then you have a further £830 a month, so over £2.5k a month, which is the equivalent of a £38k a year job. In which case you are not poor.

@Pufflebow Thanks. It's funny because using the rent money and money I'm paying to debts keeps being mentioned but I will just lose the rent element of UC if I sell it and have the cash. I pay literally around £30 to debts because it's all I have. They are all frozen interest and on special repayment schemes so not growing.

But I am thinking of making a living from a shared house.

You could do that but you’d need to ensure you have tenancy agreements in place even for shared house, ensure the house is safe, so all safety certificates for boiler etc. And then you’d need to be a landlady, so deposits etc need to be protected. May be easier to get a lettings agency deal with this.

You will probably also be liable to tax on the rentals too.

Please dont listen to anyone daft enough to suggest renting property out or think of flipping property. You just dont have the knowledge to do this, both are risky even if you know what you are doing. All those property TV shows carefully avoid the cost of fees and taxes. Unless you lived in the property as your own home there would be Capital Gains Tax to pay, there are fees on purchase and sale. I've moved house several times, still wouldnt do it as a business because I know some of the risks.

One other point - your council tax might be different in the 80k house, possibly more expensive but if you get help with council tax now the difference may not be great.

How old are the children? Would you have a spare room to rent? Because landlords are exiting the market (too much regulation, too little profit) rentals are in short supply and people are willing to rent rooms anywhere, especially if you'll allow pets. Those saying an £80k house wouldnt attract a lodger have no idea.

Is the property in a better area/nicer than your council house? If so I'd be tempted to move into it.

I wouldn't start being a property investor in this market though as it is either stagnating if not due a dip so flipping wouldn't earn you much at all and you could end up losing money for a lot of stress and work, also trades cost a bomb so unless you have can do it all yourself, I wouldn't. You'd probably earn more putting it in a high interest savings account.

As others have said if you decide to stay in your council house pay off your £20k debt and put a big chunk of that £60k into an ISA. If you have care experience is there anyway you could do it privately? Like work directly for a family in their home for someone who was disabled or elderly, surely cutting out the agency middle-man means you could earn more? Get yourself DBS checked and any other certifications? Also there are admin routes to better paid jobs, maybe civil service? Xx

Good luck OP I'm rooting for you.

My first thought was move into it. As a carer there is work wherever you move in the UK. Children adapt.
However, you are right in that owning a house brings with it maintenance bills that you don't have as a council tenant and giving up a council house is a massive step because you'd never get another. Plus there would be no cash to pay those debts.

Renting a house out is not for the faint hearted. There are countless rules to protect tenants and the property might not meet safety standards.

So I think sell it. But follow some of the very good advice on here about using the money, especially don't fall foul of the deprivation of capital rules.

The house would still count as an asset, even if you didn't sell it.

www.entitledto.co.uk/help/own-other-property#:~:text=Property%20other%20than%20where%20you,amount%20entered%20into%20the%20calculator.

@Livinginanotherworld totally agree.
Incredible security.

In cease in value, now mortgage or rent to pay.

With £80k you absolutely do have money for a financial advisor and I would suggest that’s a very astute place to start.

Peoples definitely want too rental room's!.. Even short term for all sorts of things reasons, work study... Near ill relative... Waiting for divorce money to come through...

Ok so you are already on a debt management plan. That changes things a bit. You would usually be expected as part of the plan to declare any sudden windfalls and expected to use those to pay off your debts. They would have to be included in your plan, unless possibly if you moved into it and it became your home , You would need to talk to whoever is managing your debt repayment

@DanceWithTheBigBoysAgain

Thank you so much. I really appreciate these in-depth suggestions.

I just can't think straight about it to be honest. I love our home. I take good care of it.

Even 2K savings would be lovely to have. And believe me I would not waste that money. There are improvements to this home to be made, I could get a car, I could do the garden up.

What about my right to buy this place? This house is worth less than the one I could sell. Therefor I may be able to outright buy my current home and have some left?

Is it possible to give the council half the house price of something then have a short or small mortgage or doesn't it work like that?

Do you know whether its an IVA or a debt management plan and who is it with? Stepchange or a private debt management firm.

Move in to the house and get a lodger if you can. Maybe set up self employed carer? Depends if you have a pension etc already but if not really might work out far better pay, does depend though if its a cheap area might all be funded care. Remember uc could change and will go down as your kids get older. Don't try and rent it unless you live there too.

Ask about right to buy and if you would be eligible.

You really need to talk to your debt advisor. whoever helped you set up your current repayments first. This changes everything.
Any windfall or increase in income will often have to go to primarily servicing your debts as that's usually a requirement of whatever plan you signed up to.

I wouldn't be tjinking about mortgages. If you are on debt management plan, they are not easy like normally (but not impossible) to get.

Is your council home a house or flat? Is it council or housing association? You can find out more about right to buy here https://www.gov.uk/right-to-buy-buying-your-council-home

IF you have a rtb and the cost is less then selling the house, buying your current home and using anything left over to pay down debts would be a reasonable approach.