Marooned by the cost of a ketch

SUSANNA BISHOP

Age: 46

Lives in: Chelmondiston, Suffolk

Occupation: Actress

Earns: £10,000

Mortgage: £46,000

Debts: None

Investments: Husband has $90,000

Pension: Small amount with Equity and a personal pension

Aim: To finance a year-long sailing trip

The American husband of Susanna Bishop has such an expensive sailing habit that they spent more money on buying a boat than they did on their home. They paid £46,000 for a tiny cottage when they left London for East Anglia 10 years ago and £56,000 for a 40ft steel ketch.

A small place was suitable because they intended staying only six months before sailing away. But Susanna fell pregnant twice in quick succession and in 1998 discovered she had breast cancer. So they had to put their adventure plans on hold and look for a larger home for Elise, now 8, and Hayden, 7. They found an idyllic clapboard cottage but had to fight off London weekenders who pushed the price from £85,000 to £116,000 despite its dilapidated state. 'We bought a pile of rot in a bog,' says Susanna. They have since spent £30,000 renovating the cottage and converting the loft. Brad, who is a carpenter, did much of the work himself. The local vicar bought their previous cottage and let them stay in it while they worked on the new one.

Susanna is an actress but now spends more time teaching drama and looking after the children. Their income varies wildly, and this year they reckon to earn about £25,000 between them. They have £30,000 life insurance bought with their London flat, but they have not increased it since. Pensions are not high in their priorities. Susanna contributes about £60 a month; Brad has nothing put by, except a small pension through the American Union of Carpenters and a $90,000 shares inheritance he would like to keep as his last link with America. If they cashed in the shares to fund the trip, they would have to pay a lot of tax.

Susanna is not worried about pensions, as they have no plans to retire: 'As an actor, I hope to go on for ever. We are both the kind of people who go on until we drop.' But they are determined to achieve the sailing trip - next year before Elise starts secondary school. Susanna has thought of various ways of financing it: selling the boat when they return (although Brad is unlikely to agree); using the boat to earn money; filming or writing about the trip. They will rent out the cottage, in a popular sailing area, which should cover the mortgage and provide a small income. But she asks: 'Could we approach the building society for an increased mortgage?' When they return, they will want to borrow to extend the cottage further.

Adviser 1: Joanne Cox

The most obvious means of funding the trip is from Brad's US shares. He could reduce the tax liability by cashing them in over the year rather than all at once, particularly as he will have no income while they are sailing. Or he could take an income from the shares. If they prefer a loan, they should start with the Britannia, where they have a track record. The share portfolio is probably sufficient security for all their borrowing and is a valuable safety net, particularly as their incomes vary. They need Britannia's permission to let the property and should establish their financial position should the property not be let for some time: do they need a slush fund to cover mortgage costs or will the Britannia allow them to defer their payments until they return?

A letting agent can suggest appropriate rent, and they should decide on house insurance and whether or not to let the property fully furnished. Ideally, they should start saving now for next year with cash Isas, looking at internet, phone or postal accounts. Pension contributions can be made only out of earned income, so Susanna may need to cancel payments during the trip. She should check the implications of this with the provider or her adviser.

They should start investigating travel insurance. Because of Susanna's ill-health, underwriting may take some time and, if left to the last minute, could delay the trip.

Joanne Cox is a financial adviser with the Co-op.

Adviser 2: Janine Starks

Susanna's ideas for financing the trip will not provide hard cash upfront. Their mortgage already takes them to retirement age, so they should not extend it. They could, though, release some of the equity in the house, arrange a secured loan, and use some of the US money.

Flexible mortgages allow payment breaks but Britannia does not offer them and they could face penalties if they paid off their existing loan. As they obviously have a good relationship with Britannia, they should ask for a secured loan with a charge against the house; this is flexible because they can draw down money as they need it, although the interest rate would be higher. Touching the US money may cause a capital gains tax problem, but the longer they leave it the greater the problem will become. It is reasonable not to touch the money because it's their only retirement provision, but, in any case, their US investments need a full review. A more balanced portfolio would include investments in the UK, Europe, and other international areas. By rearranging their US investments, they can take advantage of UK tax benefits on Isas and pensions.

They should reconsider their life assurance; Susanna's history of breast cancer will make insurance expensive, so they should start by increasing Brad's cover.

Janine Starks works for Bath-based adviser Chase de Vere.

Advice is for guidance only.