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Critical Illness Insurance

Hi, Good news for me after a long string of letters, that the critical illness insurance payed! Does anyone know if I need to pay off my student loan with it? Also does anyone know if I put it in my mortgage if the lender will ask questions about it and maybe then we won’t be able to move house? Thanks

Just noticed that you hadn’t had a reply so bumping you up

Hi

Woo hoo! A payout without too much hassle. As you have discovered, it leads to some dilemmas though …

I believe that when you receive a critical illness payout the lump sum is yours to do with whatever you like unless it was attached to the mortgage with the stipulation that it had to repay the mortgage.

I also understood that student loans are only repayable when you start to earn above a certain threshold. That threshold is different depending on when you took out your student loan so you need to refer to the original documentation. As it is the cheapest form of borrowing you are ever likely to receive, I would say you should be able to receive a better amount of interest by investing the lump sum than you are paying out in interest on the loan. Again you would need to refer to the original documentation to be sure of this.

I cannot see any reason why your lender will question where a lump sum has come from if you decide to pay off part of the mortgage or that it would make any difference to moving house in the future. If you need to move in the future and you require a bigger mortgage, the usual rules apply. The value of the house, the amount of loan to value, your earnings, the term of the mortgage and the repayment vehicle (ie interest only, repayment etc). Obviously having MS may be a consideration if you require life assurance to cover a mortgage in the future as any company is likely to weight the premiums accordingly even though MS is not considered life threatening.

Personally, I would keep at least some of the money in an easily accessible savings account so you can treat yourself to a holiday or something that may make your life easier. You may not need it now but you never know what is around the corner. I spent some of mine on an automatic car and it’s the best decision I ever made.

If you are having difficulty deciding which is the best option for you then I would strongly recommend that you take advice from an independent financial adviser. Yes, they will charge for the advice but if you make the wrong decision now and regret it, you will wish you had done so. You can look up your nearest adviser online and ask how much they will charge for an hour’s discussion to help you make a decision.

Hope this helps

Tracey