how best to finance extension

M

mel o

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Age: 39
Spouse’s/Partner's age: 46

Annual gross income from employment or profession: 24000
Annual gross income of spouse:62000

Type of employment: e.g. Civil Servant, self-employed :Both public service

In general are you:
(a) spending more than you earn, or
(b) saving? Saving but then spend what we save on holidays etc, so I suppose answer is neither. Good at not spending what we don't have so caould live on less.

Rough estimate of value of home: 700k?
Amount outstanding on your mortgage: not sure but 4 years left with payment of 1100 per month
What interest rate are you paying? 5% fixed til end of mortgage Would charge us 1700 to break out of fixed rate

Other borrowings – car loans/personal loans etc: car loan about 8500 at the moment. 320 per month with C/U. 3 years left. Car 5 yrs old and plan to keep it til it dies.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 30k invested, probably worth la lot less now that shares have bombed. Another investment aunt has made for me, lovely aunt that she is, will mature in 2012, about 10k.

Do you have a pension scheme? Yes for both of us, mine will be small cos only started at 28 and job share now

Do you own any investment or other property? Yes, house rented out (plan was that it would be my pension)

Ages of children: 8, another on the way, pg, adopting costs saved apart from air fares which will be about 5k, hope to travel in Dec/Jan

Life insurance: Husband has with his job.

Monthly outgoings: 1800 per month into c/u budget a/c to pay mortgage, some of the bills.


No TV costs cos have free to air sattelite.
Phone/broadband about 50 per month
my mobile is pay as you go, around 20 per month
DH's mobile around 40 per month.
Food etc arould 200 per week
After school activities 50 per week


What specific question do you have or what issues are of concern to you?

We'd like to build an extension on a holiday home belonging to my parents and do some upgrading on our own house. We estimate the cost for both to be around 100k. (70k for holiday home/30k for our house).

Hopefully when extension on holiday home is built, that will be where we go every summer for holidays so won't be spending much on holidays after that.

We have our mortgage with EBS and a top up on the mortgage that we used as deposit for rental property. Rent covers mortgage on rental property plus the top up we took out to buy it.

Can we afford what we want to do? I'll have 6 months paid leave but plan to take another 6 months unpaid.

What is the best way to finance what we want to do? Should we top up the mortgage on our house again? We had planned to use the equity in the rental house but prices have fallen so we might not get that now.

I'd appreciate any advice. I'm not very good at "planning" money but I can live frugally if I know what I have to spend. Husband more spendy but hands over the reins to me when it comes to money cos knows he's brutal at it.
 
more questions than answers I'm afraid

How is the ownership of the holiday home managed? Do you have siblings etc...
Reason is that you are thinking of paying 70k for an extension on a house that you dont own. Think carefully about this. What happens if your parents need to go into a home or something like that (God forbid). they may need to take out their capital.

To me the figures are the wrong way round. You spend all your time in your house and only a few weeks a year (max) in a holiday home. I would concentrate your spending on the place where you get max benefit. (i.e. your home). How many foreign holidays could your 70k fund over the next 20 years.

anon473
 
Thx for the reply. I hear what you're saying about putting so much money into the holiday home. The plan is for the holiday home to be jointly funded by me and my sister, it's basically adding another house onto the back of the one that's there. It's my mother's home place and we do spend a lot of time there and ideally I'd love to spend more time there but we have to go one family at a time at the mo cos it's tiny. It will eventually be owned by us so the thinking is we might as well put money into it now when our families are young to get the use out of it. My own house has already had a small extension, now I just want to reconfigurate the ground floor to make it more usable. If I had all the money in the world, I'd love to do a huge extension but to be honest that's only greed cos the house is fine as it is.

What I'm wondering about is when I'll be on adoptive leave, will it kill us financially to have to pay this? Should we take extra borrowing to pay off the car loan so we don't have that additional payment? I always thought you don't borrow long term for short term stuff like cars so I don't know if that's a good idea.

I know we can do this cos we're in a relatively good financial situation, it's just I don't know what's the best way to do it. Before now I'd have just gone into the EBS where we do most of our business and ask them what to do but I presume there are more clever ways to approach it?

Thanks again,

Mel o
 
Fair enough. The only quibble i would have is below
mel o said:
It will eventually be owned by us
Click to expand...
be careful with this - these things dont always go according to plan (parents dont always update their wills, siblings may argue over you acquiring the house etc)

As for how to go about the loan, you have a very small outstanding mortgage so that could be a good way to go as long as you keep the term short. use http://www.jeacle.ie/mortgage/ to get some estimates of much you need to pay back over short term mortgages. Borrowing long term for short term things is worst when you spread it over 25 years.
You need to sit down and crunch the numbers as to how much the car loan is costing you in interest, and the CU (not generally a cheap way of borrowing money but it is flexible) and see what you can get.

will be interested to see what others suggest

anon473
 
Note as well that the cost of building work is dropping all the time so waiting six months might not be a bad idea.
 
That's a great website, anon, I have it saved! I can understand the reservations about the ownership of the house and I may be naive but I'm presuming my family will be reasonable to deal with.

I think the advice about holding off for a bit might be good too and financially would suit. Stupidly, I never actually thought of this! We could hold off the building until this time next year. I think planning permission lasts 5 year?

Thanks for the replies.
 
Yes. planning permission normally lasts 5 years from the date of granting.
anon473
 
Thanks for that. Will have to do some thinking and talking to my sister to see what's the best thing to do.
 
2 things.

1 - Builders are charging about 50% too much at the moment. This will come down over the next year.

2 - You probably dont need massive renovations on the holiday home. You can get a 2 bed insulated and wired up wooden structure for about €10k (very much like a shomera but without the expensive brand name). Or what about a mobile home? This allows you to holiday in other locations and provides more room for you at your holiday home. Of course you need to make sure you have the room for these.
 
Builders certainly are still chancing their arms at the moment. I had a guy around to look at the renovations I want done to my own house - knocking the 3 downstairs rooms into 2 bigger ones, one wall to be knocked is holding up the back of the house so needs lots of steel. Also will have to rejig the bathroom to relocate toilet waste pipe and there are a few other little jobs (at least I think they're little!). He quoted €39k!! And when I laughed at him, he started backpedalling fast "That's including reroofing the back (didn't ask him to) and includes vat. Oh and I think I might have priced it at last year's figures. And I priced you for 18 spots (nothing wrong with the 8 that I have) but I only charged you €50 each and that's what the electricians charge me..."etc etc. So lots of chancers out there still.

The jury's still out about the holiday home. Me DH and sis all have secure jobs, thank god, but sis's DH under constant threat of redundancy so a little afraid to put it off for too long in case the bank won't give sis and DH mortgage to do it. Anyway, there's lots of time to think while we wait for the planning permission to come through.

Minion, the whole idea of extending the holiday home started when I visited a friend in her mobile home (actually a log cabin) and thought it was great although she paid around €80k for a 3 bed but it's just like a house. Sis was very against the idea of a mobile home on the site - she has negative associations with them for her own reasons. The idea grew from there but we decided if we're putting any money into it, we might as well do a "good" job and have it done for life. Thanks for the idea anyway.
 
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