Would you extend house/add to financial burden now?

[ExtensionProcrastination]

I'm going to lay out the bare facts and see what others think.

We are in our mid-50's with one young teen. £100k on mortgage, costing £1k per month. Generally save £500-£1000 per month.
Pensions not great for various reasons so have stepped these up massively in the last year. Likely looking at 100k in each by retirement.

We have 50k towards an extension (inheritence). To do what is planned will mean adding 40k to the mortgage. This will = £400 per month.

Plan is to host foreign students. On paper we can afford the mortgage but income from students would give us extra security and savings.

This was all ready to book in the diary two weeks ago but the world is a different place now.

So my question is, would you look at adding that sort of burden to your finances when the price of the build is likely to go up and general costs will squeeze us into needing the income from students?

Other ibfluencing factors: young teen has ASD so I can't guarentee he will take to students, could love it, could hate it; both cars are 15+ and plan was to only replace one: if we need student income, we'll need two cars.

Extension would make a big difference to the house and how much better it would suit us, and cost includes new boiler (25 years old) and rewiring. It's not a 'lovely to have' luxury extension.

So the alternative is using probably most of our current 50k to renovate the current layout and put the rest in savings.

Do you need more space, or a better layout? You don't say how big your house is or how much equity there is, but are there renovated 2/3 beds in your area with the layout you want for less, or less than 50k more?

If you are doing it you need to be sure you can handle it otherwise you are 50k in the hole for nothing.

Our neighbours did this (needed the cash) and stopped as it was so problematic.

One repeatedly left the door wide open.
One kept ordering deliveroos at 10/11pm at night
One accidentally started a small fire with a candle...
Its not always easy money.

It's a bit of both! It's a bunglow with big beds and lounge but a small kitchen so there's no room to sit. Lounge wouldn't fit a table due to where various windows/doors are.

So the 'extension' is to knock the kitchen through to a bedroom, then replace the lost bedroom with a loft conversion. The loft is really big, so can fit two beds and bathroom (hence spare room for students or weekend visitors).

We can't move to find what we need without spending a lot first as the whole place needs updating. Boiler, electrics, insulation, kitchen (again, not for luxury, it's 30+ and there's no hot tap working, cupboards are warped or broken, laminate lifting), bathroom. The place opposite us (similar ground floor with 1 bed and ensuite in loft) sold for more than 100k more than our recent valuation, because the whole place was up to date. Without an extension, ours probably needs 40k spending.

It's only the last 3/4 years we have been able to start saving, so managed to replace all the windows last year.

Exactly! There's no guarantee it would work. A few weeks ago I felt comfortable with it as I was treating the prospect of students as a top-up and a boost to savings, but if rising costs make it a necessity then I'm cautious. My main concern is if DS isn't comfortable, I would hate us to be in a position where we can't turn down the extra income.

Would an extension for the kitchen into the garden cost less so you wouldn’t have to rely on other income? Or use the money to significantly reduce your mortgage payments?

Not significantly, only around 5-10k less, because it's more costly comparatively to extend with the need for foundations than to go into the loft. So we would still be adding 30-35k (300-350 per month) without the benefit of any potential income from a spare room.

I wouldn’t want to rely on the income from foreign students to retrospectively fund this.

As you said, aside from the precarious worldwide situation, you have no idea whether DS would cope with it.

It's so upsetting as I'd costed it all out and it looked good, but in some ways I'm glad it's being stress tested by global events (not glad about global events, in case someone piles on!). We are in our 50's, anything could happen to us. Before, I felt comfortable with the small risk of different scenarios, now I'm realising that things can change in a minute that make day to day costs feel very precarious.

I am risk averse but also want DS to not be living in a doer upper for his whole teenage years because we run out of money before the end!

I worry that if costs spiral then there's no holiday fund, no saving for driving lessons or college, no scope for us to drop a day's work as we head towards 60, etc.

I suppose I want a bit of a balanced view as I do tend to catastrophise and think "what if?" to the nth degree!

Fewer foreign students are coming to the UK because of changes to visas (amongst other things) so I wouldn't advise taking on debt for a loft conversion. Post a floor plan on the property board and see if people can come up with ideas to reconfigure downstairs.

Off to walk dog. Back later!

Our neighbours took in students for a while, seemed seasonal, quite a lot of hassle and she was very strict with them as you have the choice of that or they walk all over you apparently. It would be a lot of hassle, particularly as you get older so I am not sure I would want to rely on that as a long term pay back plan.

Oh I am a planner so have lots of floor plans in Excel!
We could knock the wall between the kitchen and bedroom and shift it to give us an extra 40cm in the kitchen. It doesn't sound a lot but that would give us room for a table.😂

Yes the foreign students thing is where I'm wobbling. Before, I saw it as a boost that we could afford not to do if we didn't like it...but if the build cost goes up + £50 on gas/electric + £50 on food + £ 50 on petrol....suddenly we end up with little wriggle room.

Update your house, replace your boiler, knock through the kitchen and give it an update. That makes the house pleasant and saleable if necessary. Someone else can do the loft if they want to.

I wouldn't take on debt at this stage. I'd invest the money that would service the mortgage, probably into the pensions.

Do you live in an area where a Monday to Friday lodgers would work, or Airbnb? I'm not sure what the market for that is now people are doing more WFH, but might be worth looking at looking into?

Not in current climate because unemployment is now up to 5.2 percent and rising. I'd not be surprised if we have a recession. All the upset with oil too, I'd leave it for the moment.

I agree with @TheSmallAssassinabout a Monday to Friday lodger. That’s a bit more stable than having a conveyor belt of foreign students and perhaps something all three of you would be more comfortable with.

Also agree with @RosesAndHellebores about updating the house - that seems a more sensible and cheaper option than the extension. I wouldn’t be comfortable taking on £40k debt to add onto a £100k mortgage in this dreadful economic climate, especially at your ages.

For me personally I think there is too many risks . I would do the extensions/work needed to make the house work for you but take the students out the variable (so don’t do the loft extension if this is only to house the students) especially as you have concerns around your son .

If you live somewhere that you might be able to get a normal lodger, rather than a student, then I’d say go for it because it will make your house better, you do already need to do the work, and a steady lodging arrangement will give you the income you need. You can still be picky about who your lodgers are, perhaps more than with students depending on what sort of scheme you would be obtaining the students through. But there are always people who are looking for somewhere to stay, at least Monday to Friday, and as long as you set the ground rules with them early then this is a good way of paying for it.

I don’t think it is going to be all that affected by the global and economic position, because actually if you’re wanting a lodger rather than trying to rent out a house to people, you’re going to find that there are more people who can afford to be a lodger than can afford to at lease a house in the current market.

I think you a make smaller changes for your family comfort and value of your house for resale.

I have 2 adult DC with ASD-school and life got more overwhelming in their late teens. They need their home to be a haven, where they have a break from the demands of the world. Having students living in their home would be very different, add social and sensory demands and therefore could actually cause regression and damage.
I would strongly advise against this as a way of generating income, particularly as they will be in the loft area where their noise will be heard throughout your home. A side annexed accommodation with separate access may work better.

@stormsurfer yes this is where I am heading. He can be very contrary, coming out his shell in situations I wouldn't expect but shutting down in others where before he would have been comfortable.
I couldn't contemplate making his life more difficult if I have the choice to make it actively better (by having a nicely done up home where he can host a mate and possibly look at affording to reduce an hour a day at work to be more available) rather than potentially being even busier than now because we struggle for money so students are staying and needing ferrying around.

When are you hoping to pay off your mortgage? This would worry me massively as my plan is to pay off my mortgage by your age. I just feel you don't know what is around the corner. I don't know if I would have the capacity to pay off more as I get older. Also, I would be looking to downsize rather than upsize when I have one teen left in the house. But you say you are a planner, so more than likely it will all be ok. I just feel the mortgage debt as a huge burden, but that is my personality.
I'm interested in how you saved/paid for the windows, as we need this too.

The main mortgage has 8 years left so we will be early sixties.
This is how I feel. I want us to have options to overpay mortgage, put more in pensions, drop hours, go on holidays or weekends away: none of those will happen if we borrow more.
This thread has pretty much made up my mind to not borrow more.

Re the windows, we were finally in a position to save a few hundred each month over a couple of years to pay for them outright. Then the inheritence happened which gives us scope to get everything else done that's needed.

For lodger income to be realistic since you notcsure your ds will cope then needs to be separate annex /entrance maybe airbnb style cabin in garden

I don't think you can put a price on the feeling you get when you get home, can shut the door and leave the world outside. No way would I give that privacy and security up to have a lodger of any sort, unless I was absolutely desperate, so certainly not for a 'nicely done up home'.

Where do you eat currently?