Asset rich, cash poor…

Jujujellybabyjumbo

I’ve never been particularly money minded or materialistic, but always debt free. But I’ve hit a crunch. My partner and I have had the privilege of inheriting his parental home. We would love to refurbish it, it needs a new boiler, windows, kitchen and bathroom. Nothing fancy needed, but nothing done to it since the 70s and we would like it to be our ‘retirement home’… We have a small terrace, all paid for, which would be snapped up. But we only have about 25k in savings and I have a LGPS pension in the future… I’m 58, and my partner earns a low income. How could we fund a move? I’m clueless. As I have a very busy, demanding job, really, really wouldn’t want to move in until the majority of the physical work is done. Help!

Marcon

Jujujellybabyjumbo said:

I’ve never been particularly money minded or materialistic, but always debt free. But I’ve hit a crunch. My partner and I have had the privilege of inheriting his parental home. We would love to refurbish it, it needs a new boiler, windows, kitchen and bathroom. Nothing fancy needed, but nothing done to it since the 70s and we would like it to be our ‘retirement home’… We have a small terrace, all paid for, which would be snapped up. But we only have about 25k in savings and I have a LGPS pension in the future… I’m 58, and my partner earns a low income. How could we fund a move? I’m clueless. As I have a very busy, demanding job, really, really wouldn’t want to move in until the majority of the physical work is done. Help!

Is that realistic? How would you fund all these improvements without the sale of your current property (which may or may not be 'snapped up' in the current climate)? 

Most people manage to live, at least temporarily, in a state of building site chaos if they are keen enough to have their property renovated and have no other way to fund their accommodation while the work is being done. You may have to reconcile yourself to that possibility, although I completely understand why you'd much prefer an alternative (me too!).

Have you actually done any costings of the work which needs to be done? Is borrowing realistic?

Woodstok2000

How much is the work likely to cost, roughly? 

SVaz

Loan and then pay it off when your house is sold.
That’s what my in laws did,  they didn’t put their house on the market until the inherited property was almost finished,  they had new windows, boiler / rads,  new flooring throughout,  kitchen and bathroom renovated, all downstairs replastered.
Cost about £25k a couple of years ago.  Took almost a year but they also had to empty out the very full house first.  

Roger175

Here's what we did with our current property which might be appropriate.

We bought a derelict smallholding and obtained planning consent to demolish the existing buildings and build a new house and a large garage with an annex above. We had sufficient funds to buy the plot and do about half the work, but needed to release the capital from our existing house to complete the project. The existing house being mortgage free.

So, we took out an offset mortgage on our existing house and initially left this totally undrawn (so no interest payable). We then spent about 18 months building the new Garage/Annex which we did using our available cash. We then moved into the Annex and rented out the existing house. We then started building the new house and started drawing down the funds from the offset mortgage as a when needed. The rental income more than covered any interest and the surplus went into the new build.

We self-built, so the advantage of doing the offset mortgage meant we didn't have any formal process in doing draw-downs from a bank, which we would otherwise have had, if we had gone for for a self-build mortgage. I was particularly keen to avoid this and having to deal with a Bank Monitoring Surveyor as this is actually what I used to do for a living and I know what a pain in the ar*e, the whole process can be, as well as being considerably more expensive in terms of rates and fees. In simple terms, we just used the existing house as a bank and released the money from it as and when bill became due.

Once the new house was complete, we were in a position to sell the existing house and clear the offset mortgage. We didn't actually do this straight away and instead opted to convert to a BTL mortgage and rent the house for a further 4 years, before deciding we just didn't need the hassle of being landlords and so sold up. 

An offset mortgage on your existing terrace house may be just what you're looking for.

mark_cycling00

Having a big house but little income is not a happy situation for most people.

Bigger houses require more ongoing maintenance, get taxed more, have higher bills and insurance. 
They eat a lot of your disposable income over time. Perhaps 2% of the value each year? 

How sure are you that it just needs cosmetic improvements? Is the wiring and fuse box from the 1970s? Asbestos tiles on the garage?

You'll adapt quickly to the larger house and the "fun" factor will disappear, to be replaced by the annoyance of all the extra housework which Will get harder as you get older in retirement.

I'd use the cash to generate income and be able to enjoy retirement. 

barnstar2077

Jujujellybabyjumbo said:

I’ve never been particularly money minded or materialistic, but always debt free. But I’ve hit a crunch. My partner and I have had the privilege of inheriting his parental home. We would love to refurbish it, it needs a new boiler, windows, kitchen and bathroom. Nothing fancy needed, but nothing done to it since the 70s and we would like it to be our ‘retirement home’… We have a small terrace, all paid for, which would be snapped up. But we only have about 25k in savings and I have a LGPS pension in the future… I’m 58, and my partner earns a low income. How could we fund a move? I’m clueless. As I have a very busy, demanding job, really, really wouldn’t want to move in until the majority of the physical work is done. Help!

Sounds like a small mortgage would cover it, but make sure you really dig into the numbers first (As in, go over expected renovation costs, add 20% to the expenses and a few months of delays and see if you would still be okay financially before you even do anything.)

daveyjp

Getting to know exactly what work is required is key.  How old is the property?  A 1960s property not touched for 50 years could be a very different proposition to an 1870s property in terms of potential problems over and above what you want doing.  You may also want to consider if the layout is still suitable.

I'd certainly be adding a rewire to your immediate needs list, plus soffits, facia boards, guttering, it may need plastering to some areas, especially after a rewire and decorating throughout to finish.  You then need carpets and other floor coverings, light fittings, alarm etc.   Also don't forget outside.  Garden, driveways, walls, fences etc.  However with a property to sell you should have equity to borrow against, so funding it shouldn't be a problem.

Selling both and finding a ready to live in property may be worth considering if the thought of the above project is overwhelming and the desire to live in the childhood home isn't overwhelming.

Bostonerimus1

The safest option would be to sell the inherited house. If you are set on moving make sure you understand all the financial implications like the cost of improvements, council tax and utility bills.

leosayer

This is a retirement planning forum. 

Do you have retirement goals such as annual income requirements and age?

Have you assessed whether this property can help you achieve those goals?

Brenster

Why not sell your house, with an agreement to rent following sale for 6 months, and use the sale funds to make the inerited house what you want it to be.