Q I'm getting married next April and we want a white wedding with all the trimmings. We have our house and mortgage already and as our income allows, we could arrange an equity release to fund our big day. What do you think? We will need about €50,000 to pay for the wedding and honeymoon.
A I am not sure lenders would be keen to release equity for that amount and purpose while I am also not sure, no matter how well you can afford it, whether in these recessionary times, it is prudent to spend this kind of sum.
But, leaving that caveat out of it, you are right in that cash flow is all important. Income is your number one asset and it has to pay for everything. Remember, though, when the heirs start arriving, you'll need thousands to fund them -- some reports have estimated as much as €180,000 to fund them up to completion of their third-level education! And that's probably a conservative estimate!
Even if your mortgage lender does approve, you will need an extra €12,000 income per annum to justify this top-up between the both of you. Bear in mind, with the dip in house values, the loan-to-value to include your €50,000 top-up will have to be less than 80pc -- in other words if your home was worth €500,000 two years ago, it may be worth only €350,000 today. Therefore, the maximum loan that your lender would approve to include the €50,000 would be €280,000. Alternately, you could go to your local friendly credit union and over a 10-year term, the unsecured repayments would be about €620 per month at an interest rate of 8.5pc. You would also have to lodge €12,500 initially into an investment account with the credit union (usually as a member, you can borrow up to four times what you put in). Can you afford this on top of the home loan? Finally, you could start saving now -- say, €2,000 a month for the next two years -- and delay your wedding day for a year. Then you'd have no debt starting out on your married life.
Q Having been laid off twice before, I am worried about it happening again now that I am recently married and have a hefty mortgage. I have been employed for the past two years, as has my wife, but I can't be sure of the job in these uncertain economic times. Is there any kind of unemployment insurance I can take out?
A Repayment protector insurance was widely available until recently when the main player pulled out of the market owing to the many claims it had to pay out. However, there is still one company, Assurant Insurance, a US top 500 company, providing this type of cover in Ireland. They are offering a maximum of €1,500 per month up to a maximum of 12 months if you have an accident, are sick or lose your job. The cost will be just short of €150 per month, plus the policy MUST be in force at least four months before a claim can be made. It certainly will give you peace of mind and some breathing space should redundancy knock again. Email me for further details on the offer.
John Lowe, Fellow of the Institute of Bankers, is founder and managing director of Money Doctor, regulated by the Financial Regulator and author of the best-selling The Money Doctor Finance Annual 2010 and 50 Ways to Wealth (both Gill & Macmillan) now available for seminars and consultations; email firstname.lastname@example.org or email@example.com or call 01 278 5555