Santander is charging me £10,000 to repay my mortgage early

AROUND nine years ago, I took out a £135,000 mortgage with Santander. It was a fixed rate at 5.5 pc, with a £10,000 penalty if repaid before the term expired.

I mistakenly thought the penalty would be reducing pro-rata.

To send my daughter to private school, we changed the mortgage to interest-only. However, I was finding the mortgage repayments challenging, and I am semiretiring this year, so I sold my home and moved into rental accommodation.

I want to pay off my mortgage with the proceeds, but now face the penalty charge. I have contacted Santander to ask for a reduction, but to no avail. A. S., Newquay, Cornwall.

You questioned in your letter whether your mortgage was fit for purpose. Well, in that it was there to allow you to borrow money to buy a home, yes, it was.

It is, of course, your responsibility to make sure you find the means to repay it.

You took a ten-year fix, which gave you the security of being able to budget longterm — but carried the disadvantage that you would face hefty penalties for paying it back early.

It seems that, with the extra financial burdens you took on, you could no longer afford the loan and did, indeed, need to repay it when you sold your home.

I can see this becoming a more common problem as people take out mortgages later in life.

Santander has considered your case again and agreed to reduce the redemption penalty by £2,000 to £8,000.

This is still a lot to pay but, as you say, you did know the size of the penalty when you signed up.

I queried two other details with Santander. It seems the literature was clear that this was a fixed penalty and not on a sliding scale.

I noted the mortgage is due to finish when you are 66 and asked whether Santander had checked you would have the means to repay a loan running into retirement.

It seems the original loan was arranged by a broker, and you were happy with the term as you were self- employed and indicated you would be working beyond 65.

When you switched to interestonly in 2007, you signed a form to say that you were aware of the implications — and took the loan on a non-advised basis.

MY LATE husband used the online payments system PayPal for years. When he died on December 24, 2013, closing his account was one of many things I had to sort out.

I couldn’t do this online, as I no longer have the internet — my husband was the only one who used it. My niece found a number for me to call, but the lady I spoke to told me I needed a letter from my solicitor proving I was my husband’s executor.

My husband did not leave a will and so there is no executor. I asked to speak to her supervisor, but was cut off.

I don’t know what to do next or if there is money in the PayPal account. It’s upsetting to have this hanging over me. S. T., Tyne & Wear.

Your letter details exactly the type of behaviour Money Mail has been trying to discourage through its Looking After Your Legacy campaign.

It should never be this hard to cancel an account when a loved one dies — families have enough to deal with without financial firms making simple matters more difficult than they need to be.

PayPal has apologised for causing you additional stress and says that it was only trying to ensure its customer’s details were kept safe and secure. If there is no executor, PayPal says it is usually happy to deal with the next of kin.

The staff member you spoke to should have advised you to send a letter to the firm requesting that the account be shut down, along with a copy of your spouse’s death certificate. But it seems the person you spoke to had not been trained to handle this type of sensitive situation.

Someone from PayPal has since called you to confirm that the account will be closed as soon as you post it a copy of your husband’s death certificate.

Yet, just when it seems the firm is finally dealing with the problem, you tell me PayPal demanded that you send the copy of your husband’s death certificate via recorded delivery to an address in Luxembourg, which cost you £6.

So, it seems this may not have been just a one-off training issue.

I AM likely to leave an estate of £500,000 when I die and want to reduce it to below £325,000 for my children and grandchildren.

If I donate the £175,000 difference to charity, are those bequests deducted from my estate before inheritance tax is calculated? B. N., Somerset.

YeS, you can deduct the £175,000 donation from your estate, which will bring it down to the magic £325,000 level at which inheritance tax starts to bite. If you give less to charity, then your estate pays inheritance tax on anything over your £325,000 allowance.

If you leave less than 10 pc of your estate to charity on your death, what is left is taxed at 40 pc.

A £25,000 donation would reduce the value of your estate to £475,000, so tax would be owed on £150,000 — an inheritance tax bill of £60,000. This would leave £415,000 to go to your offspring.

If you gave away 10 pc or more of your estate to charity when you die — let’s say £75,000 — the tax rate on your estate falls to 36 pc. In this case, that would mean the tax bill would be £36,000 on £100,000, leaving £389,000 for your children.

Before you act, you should take financial advice.

Inheritance tax is complicated and there are many ways in which you can give away money while you are alive to reduce the bill.

If a husband or wife dies leaving everything to their spouse, their £325,000 allowance is transferred to the surviving partner — doubling their allowance to £650,000.

You also need to bear in mind that, from April 2017, there will be an additional residence nil-rate band, which will be added to the £325,000 allowance if you leave your home to your children or grandchildren when you die.

This will be up to £100,000 in 2017-18 and rising to £175,000 by 2020-21. This means your total inheritance tax allowance will be up to £500,000 by 2020-21.