Unfair penalty charges on a mortgage

joey_boy

Hi,
I'm brand new to this site.
A friend advised me to come here to get some advice so here I am.
This is my first post.


My wife died suddenly back in April of this year. She was 39.
We have a 5 year old daughter who is doing remarkably well, all things considered.


I have had a mortgage since 2003 & have never defaulted on a single payment.
When we moved to our new home in 2011 I changed mortgage lenders from Chelsea building society to the Nationwide building society.
At the time my wife was a housewife & I was (& still am) a wholetime serving firefighter.
We approached the Nationwide through an independent mortgage advisor & was told by them that as my wife had no fixed income she would not be able to be named on the mortgage. However, it was no problem for me so we went ahead & purchased our dream home in my name.
We both took out life assurance policies with Legal & General at the time, too, to cover the cost of the mortgage should one of us die.
Thank goodness we did!


After my wife died I contacted the Legal & General insurance company who paid out very quickly.
I next got in touch with the Nationwide to pay off my existing mortgage which was by then approximately £134,000
However, due to the fact that I was paying it off early I also had to pay over £7000 in penalty costs!
When I told them my wife had very recently died they were not interested as her name did not appear on the mortgage!


Do I have a leg to stand on? Can I claim this utterly unfair "theft" of my wifes' life assurance money back for my daughter?
Is there anything I can do?


Thank you so much, in advance, for any help offered.


Joe.

kingstreet

Yes. Pay off the mortgage in chunks, taking into account the early repayment penalties. You may have to spread this over a few years.

Repaying the mortgage in full now is not mandatory and may not be particularly sensible if you have;-

a) debts with a higher interest rate
b) early repayment penalties.

A lender may waive an ERP if its borrower was to die, but this would be completely discretionary. As your wife was not a borrower, Nationwide has no obligation to waive the penalties, nor would it be obliged if she was...

Thrugelmir

Sorry to hear of your loss.

If your mortgage product has early repayment charges then yes they have to be paid. There's nothing personal in this decision towards you. In fact it's tied up with how lenders fund fixed term mortgages. There's no theft involved.

The best option would be to continue to pay the mortgage as normal. Whilst at the same time overpaying by the maximum every month you able to. Then when the product reaches the end of it's fixed term you can repay the remainder of the debt.

joey_boy

Thank you both for your replies.
Just to clear something up here: I have already paid the Nationwide the full & final amount of the mortgage & am now in the very enviable position of being mortgage free. Although, I have had to pay the ultimate sacrifice for it.
I was just hoping that there might be a way to claim back the £7000+ in penalty clauses.


Joe.

kingstreet

No, there isn't.

If you've already done it, it's too late to undo.

It would have been easier to plan alternative scenarios before you took the action you have.

As an ERP compensates the market counterparty which provided the funds on the rate you agreed for the period you agreed, effectively for breach of contract, it's very unusual to be able to avoid it.

haras_nosirrah

how much longer were you tied in for?

unfortunately nationwide have done nothing wrong so it is unlikely they will refund it. By banking the money and waiting till the end of the erc period you could have saved this money but you cannot go back in time.

lenders borrow the money from elsewhere so they also have to pay a penalty if they break the deal with their funder - this is what the erc covers. You are breaking the contract and they have charges as a result - the circumstances don't matter.

You can appeal to them but they don't have to refund.