Recovered from cancer - will we get a mortgage for holiday home?

S

suemoo

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Hi all,

I'm looking for a little bit of advice on my situation, last year my husband was diagnosed with cancer, it's been a horrendous year for him with surgeries, chemo and with two young kids to throw into the mix as well life has been hard for my family.

He also got the all clear a few weeks ago and believe me when I say I know how precious and fragile life is now. I've learnt that lesson well this year....so for me it's time to stop talking about our dream and put it into action. We have always talked about buying a little cottage in the west of Ireland and the advice I'm looking for is how best to do this.....our concern is that if we add a top up mortgage to our mortgage with EBS would that affect the entire life insurance policy we have? I think it would as the cancer would be classed as a pre-existing condition so the premium would skyrocket....also can't put the family home at risk as god forbid if anything happened in the future our home has to be secured for our two kids.

We both earn a decent wage (hubby went back to work 3 weeks ago) he earns 55k per year and I earn 63k plus 5k bonus , our home would be valued at 250k ad we have a mortage of 140k on the house. The cottage we are lookig at would need 100k mortage on it and we will have the deposit in fully saved in early 2014.

Any advice on what to do here would be greatly appriceated...kind regards

Sue
 
You may be able to get a mortgage on the holiday home without mortgage protection. I think it's only a requirement for the family home. And even for the family home, you can get it waived if the premiums are unreasonably high.

So forget about the mortgage protection insurance. If anything happened, you would have to sell the holiday home and pay off the mortgage on the holiday home.

How much is the holiday home you have in mind?

Overall, you might just be better off paying down your home loan as much as possible. If your husband gets sick again, and can't work, your income will take a big hit. You will just have another thing to worry about if you have mortgages of €240k. If you have paid down your home loan to a very low amount, you will be able to handle a fall in income.

You have good salaries. You have good savings. Defer the dream for another few years so you will have total comfort.

Brendan
 
Where do you live now? Are you anywhere near the West of Ireland? If you are in Dublin (making assumptions here) its a very long drive at weekends. My brother in law had cancer last year. Mindsets change. I would not be getting into more debt at this stage to be honest..
 
Thanks for your replys. The cottage costs 110k and we have 20k saved so far, that's great that we don't have to have mortage protection, a year ago there was no way a i would consider this at the moment, kids too young etc and do we need this extra pressure. But, this has been our dream for years... life is too short and is for living. God forbid if he gets sick again, but even if he got really Sick again he has a pensionable civil service job and would not be left with out some sort of income. I will
Start to investigate further! Living in Dublin
 
suemoo said:
Brendan, what if there aren't a few more years to be able to wait? Sue
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If I understand this correctly, you would like to "live the dream" as soon as possible, just in case the cancer returns and your husband doesn't last?

Financial planning is about choices under uncertainty.

You can choose to buy the house, as long as you are aware of the financial implications. You may get a few years of the dream, but then be facing serious financial pressure.

Can you live the dream in any other, less expensive, less risky way?

Could you rent a cottage in your chosen location? Or is this the dream cottage that only comes up once in a few years?

Could you choose your cottage in a location which would be lettable if you faced financial difficulty at a later stage?

Finances are not the only thing in life. If this is your dream, go for it, but be aware of the costs.

The interest cost will be around €7,000 a year net and probably rising. €110,000@6% interest. Other costs will include property tax and the costs of running a house. Say €10,000 a year.
 
I'm a great supporter of following your dreams and I'm pleased to hear that your husband got the all-clear.

BUT

Personally I wouldn't buy the cottage. As it happens this opinion has nothing to do with your husband's cancer. Mrs F and I have occasionally thought about buying a holiday home - we love Lanzarote, Portugal etc. We'd love to think that we'd swan off to our holiday home four or five times a year. But, like you we have two kids. You have two full-time jobs. With two jobs and two kids, I'm guessing that your life is busy. Be realistic - how often are you really going to get to the West of Ireland?

You'll pay a higher interest rate on the mortgage because it's not a primary home loan. Let's say you borrow €100,000 over 20 years at 5%. That's €660 per month...€8,000 per year plus any repairs, running costs etc. And you'll have put your €20,000 savings into it.

If you instead spent your €20,000 savings and €8,000 per year on rented holiday accomodation, I think you'd get more bang for your buck. Or perhaps more sensibly, don't spend your €20,000 savings...
 
LDFerguson said:
You'll pay a higher interest rate on the mortgage because it's not a primary home loan. Let's say you borrow €100,000 over 20 years at 5%. That's €660 per month...€8,000 per year plus any repairs, running costs etc. And you'll have put your €20,000 savings into it.

.
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I used the interest rate. Liam is using the actual repayments, which is a better way of looking at the impact on your cashflow.

The 5% will rise though.
 
Hi Suemoo

Great to hear that your husband is on the mend.

Regarding the mortgage protection, your husband wouldn't get it anyway. He would have to be in remission for at least 5 years before an underwriter would look at his case and even then, it would be expensive.

I'm a big believer in life is for living and money is for spending. No point in having it otherwise. For most people, it's the shock of a life changing event that starts people into action.

I agree with Liam's attitude on holiday homes...if they are abroad. It takes a lot more time and planning to get to Portugal for instance than hopping in the car and heading off for the weekend.

You really need to exam the costs under all scenarios. As a holiday home, there's no rental income, so can you afford the mortgage on it? Would you get a mortgage based on where it is located? Could you rent it if needs be? What lump sum would you get from the public service if your husband died? it's be anywhere between 1 - 1.5 times salary. What kind of disposable income do you have? How much more will the kids cost in coming years?

There's a lot to be considered, especially for long term debt that isn't going to produce an income.

Don't give up on the dream, just make sure you have checked everything out beforehand.

Steven
www.bluewaterfp.ie
 
SBarrett said:
I agree with Liam's attitude on holiday homes...if they are abroad. It takes a lot more time and planning to get to Portugal for instance than hopping in the car and heading off for the weekend.
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True, but the financial argument still stands. A quick Google search tells me that you can rent a nice house in the West for €250 per week. To spend €8,000 per year, that's 32 weeks' renting...
 
Good luck with the health issue.

As already outlined in previous posts you will have quite a lot of outgoings on the purchase.
You will have €6000.00 a year on interest
Higher Insurance costs as it is not your PPR and to comply with what is standard times for leaving the property vacant may cause you problems (more 30 days vacant at a time usually causes difficulty with Insurance Co. Insurance likely to cost €500

Local Property tax.

Heating and lighting even when you are not there.

TV licence ?.

Maintenance of the property ?.

In my own honest opinion I would think you should consider renting for 1 or two year periods. You could also change location by renting in different locations from year to year.

Unless it is your dream holiday home in your dream location I think you should rent.
Good luck with whatever you decide
 
Suemoo,

We bought a holiday home this year, the key thing for me was to find a place which was max an hour drive from our home. I felt any further we wouldn't make use of it. It also needed a bit of work which we enjoy and should be a good investment going forward.

We have made great use out of it so far and have really enjoyed it.

Yes it can be a bit of a drain but the flexibility is great and in our personal circumstances were we own a shop connected to our house which is open 7days a week, 364 days a year 6am -9pm which is why we needed a bolt hole to get away to!!!!

Life is short so it really is down to personal choice.

Dermot made a good point in renting in the area. we done that for a few holidays to make sure we were happy with the idea and liked the area.
 
Just a point I'd like to make on costs. People saying 8000 a year mortgage repayments. That includes two items. 2000 debt repayments (equity) and 6000 interest.

The 6000 interest contains 2 costs also. The future value of money cost and the banks profit margin. With interest rates so low you are probably paying 4000 a year to the bank in profit. That's 350 a month in dead money.

There's a woman in work with me just bought a 132 car on 450 a month over 4 years.

There are other costs as mentioned above, property tax, water tax, electricity, heating, television, basic maintainance etc. say 3000 grand.

My brother, wife and 4 kids spent that last summer for a week in lanzarote.

A holiday home is an expensive luxury but no more so than changing your car every 4 years and taking a sun holiday.

It's all about personal preference and wether you can afford it.

The cancer thing would stop me doing anything but otherwise I would dive in.
 
On the negative side you have the lost opportunity to earn interest on the deposit and equity portion.
Also property is an inflexible investment.
 
I think people should more often pay attention to the distinction between thoughts and experience:

The thought of a holiday cottage in the West is a pain-free, lovely thought in line with your values and your ambitions for your family. These sorts of thoughts even relieve anxiety by just thinking them.

The experience of actually owning a property in the West would be entirely different. It might actually add stress rather than relieve it.

My advice, seek out to get as close to the experience of the thing as you can get, before you do it. Talk to others who did this, ask other holiday house owners about the experience of owning it. The maintenance, the distance, the good and the bad. Rent a few cottages in the meantime.

No one is saying that spending time in a lovely cottage in the West isn't a valuable way to spend your time. We are just saying the owning of it might be the element that is least considered in this scenario.
 
sadie said:
I think people should more often pay attention to the distinction between thoughts and experience:

The thought of a holiday cottage in the West is a pain-free, lovely thought in line with your values and your ambitions for your family. .
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It sounds as if you don't need to buy or even rent a cottage. Just think about it.

I know a few people who spend weeks before their holiday in a state of high excitement, planning their holiday, reading the brochures, booking trips etc
They spend the weeks following their return giving out about the airport delays, the too hot weather, the rain, the high prices, the poor hotel etc.
 
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