Plan A or Plan B?

[Shytalker]

I’m 54 and have just inherited £50k. Not enough to feel rich but enough to think about moving house.

I’m trying to decide what’s best to do!

Plan A
Port my current mortgage of £155k and do a sideways move to a 3 bed (currently in 2 bed) so I can have a lodger to bring in tax free £600 a month. Mortgage would be for 14 years to make it affordable. I may have to downsize before paying it off.

Plan B
Buy a smaller property for around £450k. No lodger income. Mortgage would still be for 10 years. Would give me less to play with in retirement (if I ever can afford to retire).

For context, I’m a single parent to a 14yr old who I need to get through state education until they’re 18. I work full time, job is pretty secure. No child maintenance from ex, so the lodger money would help make up for that. Salary is £55k so not huge but okay. Happy keep working as long as possible. Housing is very expensive where we live.

Rubbish pension so house equity is part of the ‘exit’ plan in say 10 years, ie downsizing at say 64/65 if I’ve had enough and need to release a bit of cash.

The £50k is effectively buying me a lodger income (£600pcm is realistic, and no tax to pay) and a slightly larger house for the next 8 years or so.

I know stamp duty is ridiculous but 3 yrs of lodger money would pay it back.

Am I missing anything? I don’t have anyone to ask IRL and I don’t want to make a mistake.. 😕

Why investing in ISA when you can put it into your pension and get sn immediate 40% uplift ?
A no brainer to me.

Thanks for the replies. I’m surprised at the anti-lodger sentiment though. A few of my friends have done it, and I used to host English students pre-divorce, and had no problems. I’m under no illusions about potential issues, but in some ways, having another adult round the place would give me some company while teen games in his bedroom or has friends over.

I still can’t see that any of the other options will boost cash flow month to month, which as I outlined in original post, is my main concern for the next 4-5 yrs.

It seems like quite a lot of work to gain £600 per month for the next few years. Even if you put the £50k into an account earning some interest, and paid yourself £600 per month, it would last almost 7 years anyway without any of the upheaval of moving house and then having to move again to downsize.

moving is so expensive there will always be costs you didn't anticipate, and your £50k will just be sunk then. At least if you just plan to use it as income it's still sitting there (allbeing it gradually reducing over time) if your plans change?

I’m sorry but I think a salary of £55k a year is huge!

Rubbish pension so house equity is part of the ‘exit’ plan in say 10 years, i.e. downsizing at say 64/65 if I’ve had enough and need to release a bit of cash.
As others have said, moving is expensive. Your plan is to move. And then move again in 10 years time! That will eat up a lot of your inheritance / equity / lodger-income.
I think that if you are going to move then it might be an idea to make it your 'forever' home i.e. suitable for retirement too. This assumes that you wanted to stay in this area to retire, btw, or weren't thinking of relocating to the country / seaside / whatever.

I would think twice before disrupting a 14 y.o.'s life; it's a tricky age at the best of times.

Would you consider using it for an extension (if that's possible) Then you'll have a more spacious house for your growing boy and in retirement a property that has gained alot of value to downsize from.

I've really been put off lodgers as my aunt had a terrible experience 😔but again, an extension could potentially give you space to take one in

TBH, from your replies, it sounds like your are set on having a lodger, and are looking for people to validate your decision. It's not something I would do, and think other people have given much better options in this thread, but if it's what you want to do then go for it.

Don’t get a lodger, you’ll regret it so much. We had one for about 4 years and ended up asking them to leave. Yes, we lost the income but we gained our peace and quiet. You can’t put a price on that. Have you considered Premium Bonds? Several family members have got full holdings (£50k) and win almost every month. I saw someone one the million last month and they only had £100!!

For me, the problem isn't necessarily having a lodger, it's how much money and stress it will take to sell, buy move house and get the house lodger-ready - it just seems such an expensive investment.

If you had £150k to invest in a bigger house, fine, you get more bricks and mortar and the costs are relatively cheaper per £ of investment.

You can take a monthly income from savings or from premium bonds winnings.

It will be less than you would earn from a lodger but you wouldn't have the associated expenses or risks.

Or a loft conversion

No house move, pay some into your pension and some into an ISA or off your mortgage.

You can cash flow increased every month. You have £50000. You just need to invest carefully