Wealth Check: 'I want to move to Malta - and repay my mum'

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The Independent Online

Marianne Peterson runs her own business from her home in Maidenhead, working as a freelance marketing and public relations consultant. She owns the property - albeit with a £205,000 mortgage from HSBC outstanding - but this represents the only asset she has in the UK, other than a small pension fund from a previous job.

However, Marianne also owns a property on the Mediterranean island of Malta, with no mortgage outstanding. She'd like to spend much more time there. In the short term, she's keen to work three weeks a month in Malta. After a couple of years of saving, she might even be in a position to move there full-time, and set up a bed and breakfast business.

One option to achieve this would be to sell her home in Maidenhead, but Marianne wants to keep a property in the UK, if only for sentimental reasons.

She also has to tackle a significant debt problem - she owes £7,000 to her mother, plus about £5,000 each on two credit cards. The loan from her mother is interest-free, but Marianne has promised "to have no fun and no shopping" until she has repaid it.

We asked two independent financial advisers for their help: David Hollingworth, of London & Country Mortgages, and Marc Ruse, of Swallow Financial Planning.

Case notes

Marianne Peterson, 35, self-employed, Maidenhead

Salary: around £48,000 a year from freelance marketing and PR work.

Property: Home worth £225,000 in Maidenhead, with £205,000 mortgage on a fixed rate of 5 per cent until December.

Savings: None

Debts: Owes mother £7,000. Two credit card debts of just under £5,000 with HSBC and Egg.

Pension: Not currently making any pension contributions, but paid into Equitable Life plan for seven years. This pension has fallen significantly in value.

Monthly outgoings: Marianne's priority is to repay her mother, so once her mortgage, bills and living expenses are covered, the rest of her monthly income goes to repay this loan.

MORTGAGE

Hollingworth says that, while Marianne's 5 per cent fixed-rate mortgage from HSBC is good value, she should be able to save money by remortgaging when the deal expires later in the year in December.

The high loan to value proportion - her debt is more than 90 per cent of the value of her home - rules her out of the very best deals, but she should still be able to find a fixed or variable rate below 5 per cent.

There is no reason why Marianne should not keep her home once she eventually moves to Malta, Hollingworth adds.

But he warns her that she will need to go back to her lender if and when she rents the property out. She may be asked by them to switch to a buy-to-let mortgage at this stage.

OTHER DEBT

Ruse points out that, while Marianne is naturally keen to repay her mum, she would actually be better off clearing her credit card debts first - for the simple reason that these cost money, while her mum's loan is interest-free.

Marianne is confident of being able to repay her mum by the end of the year, but if this money was diverted into credit card repayments, she could repay the plastic debt in full by early next year.

Ruse says that Marianne also seems to be somewhat haphazard in her monthly budgeting - she simply says that she hands over to her mum whatever she has left. Drawing up a day-by-day account of all her spending would enable her to identify areas for potential savings.

PENSIONS

Ruse is concerned that Marianne is no longer making any pension contributions. Depending on her two properties as investments for the future is putting all her eggs into one basket, he warns.

As a starting point, he wants Marianne to consult a specialist pensions adviser about what to do with her Equitable plan. The trouble-hit insurer is now on a firmer financial footing, but is still very restricted in the investments it can make. Marianne may be better off getting out, if the exit fees are affordable.

OTHER ISSUES

Ruse thinks that Marianne also needs advice on tax planning and protection. On the first issue he is anxious that she may leave herself open to a tax bill if she rents her property out. Secondly, he is worried that she has no insurance to protect her if she can't work due to ill-health. As a self-employed worker, this is a particularly critical issue, because Marianne has no employer to fall back on.

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