MARJAN, who is Dutch, and her husband Peter, right, want to buy a holiday home in the Netherlands for about £100,000. They hope to let it to holidaymakers, but are not sure how much rent they would get. The couple live in Cambridgeshire in a house that has trebled in value since they bought it in 1989. Their outstanding mortgage with Cheltenham & Gloucester is small, but the endowment policy to repay it, with Standard Life, is forecast to underperform. They have savings that they would like to use as a deposit for their new holiday home, but are not sure how much to put down and whether to take out a euro mortgage or to remortgage their home in the UK to raise the rest of the cash. With the cost of borrowing on the increase, they would like a fixed-rate loan but need advice on what to do with their old endowment. Daniel, their son, is about to start medical school, and Caroline, their daughter, is studying for her A levels.
Simon Jones, of Savills Private Finance, says: If Peter and Marjan decide to remortgage their UK property, they should have plenty of lenders and products to choose from. The amount they need to borrow fits in with what most banks are prepared to lend. They also have no debts, which puts them in good stead.
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Fixed-rate mortgages have been cheaper than they are today, but Marjan and Peter should be thinking about security and not just the price. With a fixed rate, you know how much your monthly repayments will be from the outset.
This will also give them the security they will need, once they start having to fund their son’s medical college fees, and potentially fees for their daughter, Caroline, too. Halifax currently offers a fixed rate at 5.29 per cent for two years. Borrowers are also allowed to make overpayments on this deal. They may repay 10 per cent of their outstanding debt a year without being penalised.
Marjan and Peter have asked whether it is better to put down a small or large deposit. If the money is available, it makes good sense to pay a larger deposit, as this will save on mortgage payments and the total interest paid over the remaining term.
With regard to the endowment policy, if it is a with-profits policy they should hold on to it. But I would advise them to swap their mortgage to a repayment basis, especially if the endowment is forecast to underperform. If they can afford to put the whole of the mortgage on to a repayment basis, then they should do.
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Savills Private Finance: 0870 9007762
Miranda John, of PropertyFinance4Less, says: Marjan and Peter would be eligible to apply for a euro mortgage of up to £70,000 (€102,500). They would benefit from the competitive euro interest rates in the Netherlands in the same way as other Dutch nationals. They may wish to lock in to one of the long-term, fixed-rate products that will protect them against rate rises but not currency fluctuations. On a ten-year fixed-rate deal, the interest rate would be 5.3 per cent, which would make their monthly repayments about £309 on a mortgage of £70,000. Generally there would be early redemption penalties, but you can usually pay off 10 per cent of the mortgage annually without penalty. However, they will be unlikely to qualify for this loan if they decide to let out their home, as Dutch lenders rarely offer mortgages on that type of property. PropertyFinance4Less: 020-7594 0555