Life insurance payout to cover mortgage

Flintybob

Apologies if this is posted in the wrong place!

My partner is critically ill. Our life insurance policy is likely to pay out soon. What i will get is in excess of the mortgage balance but I cannot repay this for a few years without substantial penalties due to terms. Obviously I want to avoid this cost so wondered what the best approach was to 'ringfencing' this money until the bulk of it is needed. 

I could let it sit in my current account earning pittance or move i somewhere else for a better return. i suspect that capital gains tax kicks in at this point.

It would be good o have the money fairly readily accessible so i could overpay mortgage payments etc but its not a critical factor.

All advice gratefully received.

born_again

Sorry for the situation your find yourself in.

Is this a joint mortgage? If it is talk to mortgage lender. As it may mean, when the worst happens that you will be able to pay it off.

Savings wise. Best to look here

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Keep_pedalling

Probably it would be best to put it into a fixed term savings that matures around the same time your mortgage term finishes. 

You say partner, are you married or civil partners? If not and you have substancial assets you might be wise to review that otherwise you could be facing an IHT liability.

Flintybob

born_again said:

Sorry for the situation your find yourself in.

Is this a joint mortgage? If it is talk to mortgage lender. As it may mean, when the worst happens that you will be able to pay it off.

Savings wise. Best to look here

Joint mortgage with a uk high st bank. Checked Ts and Cs but nothing about redemption penalty exclusions

Marcon

Flintybob said:

Apologies if this is posted in the wrong place!

My partner is critically ill. Our life insurance policy is likely to pay out soon. What i will get is in excess of the mortgage balance but I cannot repay this for a few years without substantial penalties due to terms. Obviously I want to avoid this cost so wondered what the best approach was to 'ringfencing' this money until the bulk of it is needed. 

I could let it sit in my current account earning pittance or move i somewhere else for a better return. i suspect that capital gains tax kicks in at this point.

It would be good o have the money fairly readily accessible so i could overpay mortgage payments etc but its not a critical factor.

All advice gratefully received.

Simply moving it from your current account to 'somewhere else' won't generate a CGT liability.

If you put it into an ISA you can add £20K per tax year and gains are tax free. Otherwise a high interest savings account, where interest is going to be subject to income tax (not CGT), looks a sensible choice. 

Claude_and_Eustace

I’m sorry for what you are going through. I paid my mortgage off with Coventry building society. They had a policy that if it was a life insurance payout they would waive the fees. We had only remortgaged 3 weeks before and they waived about 10k. I had a couple of hoops to jump through to show it was life insurance rather than death in service, but the bereavement department was brilliant. 

Claude_and_Eustace

Sorry I meant to also say that it wasn’t in their T&Cs, I had to speak to them. 

HobgoblinBT

Sorry to hear about your situation.

Try Google with “XYZ bank mortgage repayment fees on death of joint borrower” where XYZ is replaced with your bank.

The ones I tried said the bank waived early repayment fees so you may be best to repay rather than worry about how to hold the money for a few years. You have enough to cope with emotionally with the critical illness of your partner without having money worries and paying off a mortgage will give you more disposable income and thus help.

Best wishes to you and your partner.

Flintybob

Thank you all for your wonderful advice.

msb1234

Have you considered w much interest will accrue on your mortgage esteem the life insurance payout and the end of the early payment penalty that may be payable? It may cost £10 to pay it off now, but you may save a similar amount in mortgage interest. 

tls123

You need to ask the bank for referral to a senior the T&C s are often written as a fixed way but staff may have flexibility if you set out the full circumstances under their vulnerable customers policy.