My grandad completely forgot he took out a lifetime mortgage

"Her findings were that the children were convinced the parents didn't understand the product and had been missold. But the interviews with the parents demonstrated they understood fully. "

Yes, someone who worked for solicitors working on this told me they regularly got calls from angry children annoyed at having been disinherited.

Considering his age I would try to just reassure him now that everything will be fine, it’s a real shame but digging into why he’s done it and focusing on it as a big loss will be terrible for his mental health. I understand he will be able to stay in his home so life isn’t going to change.

There’s unlikely to be any inheritance from his estate but plenty of people don’t leave ann inheritance

You just need to reassure him that he has no need to make payments, he doesn't need to worry about not having a roof over his head and that you are perfectly happy with the situation.

You can make payments but there is no need to for either equity release or a lifetime mortgage. The house will be sold when he dies, the sum repaid and any leftovers (if there are any) will be added to his estate. You will not be liable for any shortfall.

My MIL had a lifetime mortgage to enable her to move close to us when she was older, it was a great help and reassurance for her. She had it 12 years before she died and there was still a bit left over when she died.

130% isn't it @Almostwelsh?

25% interest x 5.2 (because 10 weeks x 5.2 = 52)

I'm merely an Econ teacher though, not a would-be banker.

As people say, there should be a complete record of the advice he received and this should be documented and available on request.

When relatives find out about what their relative has done they often advertently or inadvertently make someone feel guilty which then almost forces the person who took it out to say they didn’t know. At 90, your GF may also have forgotten key details over time - there’s a world of difference between him not being clear about it now and not having understood at the time.

When you’ve seen the paperwork you may well find that this was all spelled out properly to your grandfather and you need to suspend judgement until you’ve seen it.

If you are as you say only concerned about his peace of mind, the key point is he’s had the money, for whatever reason he wanted it, and he won’t miss it and can’t spend it after he’s gone.

The longer he lives, the higher today’s price for the money that he borrowed a long time ago - it’s a positive that is still here at 90 but he may well have not expected to when he borrowed the money. Don’t let him feel guilty for surviving!

I thought Equity Release was basically just selling your home back to the bank. Win-win for home owner and bank, but nothing for the heirs.
Is that not how it works?

Also Op - you only have to look at the latest statement to see what the original loan amount was and what is owed now. Simple.

With lifetime mortgages- these days there are options to pay interest, just draw down in small tranches etc , a lot has changed- far too many were doing this in their late 60s and early 70s and £40k was turning into £120k if they were getting to 90 -

I suspect OP given the amounts you have said , then it's something like this- but clearly he had the money at some point and obviously doesn't have a home with that much value - unless of course he borrowed far more than this - to be fair a standard mortgage is no different- except rates slightly lower- if you borrowed £100k and paid bugger all back on it then 25 years later it could be £280k - due to all that compound interest

Please try and be the bigger person and say it's no big deal. He clearly knew and over the years just forgot about it or simply didn't realise how compound interest worked- even then he would have been given figures at the time

@hobbitum First thing to do is find out exactly what he signed up to. There are different options for Equity release of which a lifetime mortgage is only one.

Also, if he hasn't being paying anything towards it, it would appear that he didn't have to - or the company would have been chasing him for payments. I would have thought? You also need to check what his contract said about the repayment to the company not exceeding the value of the house. Nowadays, it isn't possible for that to happen. They can't take more than that, but if he took it out a while ago, I'm not sure what the score might be for his home

Then you need to check that he wasn't mis-sold the equity release. Please arrange to speak to the bank or whoever he took out the money with and get all the facts on what it actually means for the house and your Grandad.

In the meantime reassure him that he has a home, he won't find himself without one and that doesn't matter to you (even if it does)

I'm going to be perfectly honest and say I don't know! Decades ago I could do those sums with the instructions in front of me, but now I can't remember. I just know it's far more than a commercial loan or overdraft would charge and that was the worrying thing about the examiner's report - the young bank clerks taking the exam didn't grasp that at all.

I would go back to the lender and ask for copies of the financial planning meeting that took place when this happened (with your Grandad’s consent). If it was a face to face there will be paperwork from the time and if it was over the phone there will be documents that he signed.
Start with the original sale and understand what happened. If you still have cause for concern lodge a complaint with the lender regarding your Grandad’s understanding of what happened and the long term implications. If you are not happy with their response you can refer to the Financial Ombudsman (provided the original lender is regulated). They will take an independent look and see if your concerns are warranted.
I wouldn’t just accept it as done and dusted.

I think you are probably just going to have to keep reiterating to him that him living out his years happily is worth more to you than any inheritance would have been. It might be worth looking up some psychology type stuff on how to settle his mind by using the right phrases etc. Good luck, I hope you manage to reassure him that it really doesn't matter.

It’s no different to my inlaws who spent their endowment policy money then were shocked when the mortgage needed paying off !
There are now stringent rules around equity release/lifetime mortgage but if he did it years ago he might have been badly ‘advised’ .
He must have seen the balance going up year on year if he had statements though?
Iirc, they can only take the house, even if the balance exceeds the value.

Lifetime mortgages are still subject to compound interest now. It still really adds up, but that is all clearly explained and confirmed in writing.

Op don't make your grandad feel bad. This might have been the best thing he could do at the time. If inheritance isn't important to you then tell him that. He won't be leaving you with a debt (that's against the law now), the worst thing will be that there will be nothing left to leave you.

When the time comes the loaner company sell the property, take their money and give the balance to the inheritor. If there's no money left, or the loan exceeds the proceeds of the sale, no futher action is taken.

I’m afraid that’s how equity release works. You release a small amount of equity but the interest that accrues on the loan is huge. £20k can easy become £150k over a period of time.

But he has a home to live in now and is not going to be evicted. But ultimately the finance company who originally organised this for him will now own a significant proportion of his property.

To fully understand it you need to read all his documents and statements. Basically what he agreed to under the terms.

That’s so so sad OP

Debt doesn’t come easy ( and some are just not used to it at all ) and I’m sure he intended and wanted to pass on what he could to family…..he must be devastated
Hes lucky to have someone like you to talk to about this and whilst the problem isn’t going to go away having you will I’m sure be a great help

We don't need to know why, and we shouldn't assume her parents are still alive.

I can imagine that is hugely upsetting for him, and for you on his behalf. Do you think he was of sound mind when he signed up to the remortgage, It is possible it was done under some form of duress? Is there any proof that he was paid the money, or evidence of how it was used? It's awful for him. And I disagree with those questioning your motives. You sound like a loving granddaughter with your grandad's best interests at heart.

Assuming it was all above board, then I think they best thing you can do at this stage is to reassure him that you had no expectation regarding inheritance and you have been happier to have him in your life into his old age xx

If it's an older product, maybe taken out 15 or more years ago, it's probably calculated using compound interest. So if you don't pay the interest the interest is added to the lump sum owed, and in the following year you pay interest on both. It can add up really quickly and a lot of older people got caught out. But as far as I was aware legislation was changed some years ago to avoid this. Worth taking it up with the lender and Age Concern or Money Box on Radio 4:
https://www.bbc.co.uk/programmes/b006qjnv
or any of the consumer champions for all the main newspapers:
Telegraph: Kate Morley:https://www.telegraph.co.uk/authors/k/ka-ke/katie-morley/
Guardian: https://www.theguardian.com/money/series/bachelor-and-brignall-consumer-champions

The good news, OP, is that he has a secure roof over his head and if his estate isn't worth enough to pay the debt off on his death then any debts die with him.

If it's a 'liftime mortgage' repayments are optional. You either pay them as you wish, or pay nothing. Whatever the balance is comes out of the proceeds of the sale of the house after you die.

Honestly, for some people it's a life saver. They can give themselves security and a home for the rest of their lives.

I can see that the OP's grandfather must be upset. Not just about the financial situation and lack of inheritance to pass on, but about his own capacity for making decisions, his memory, and his ability to keep track of things.

Bluntly, if he has opted to take out this "lifetime mortgage" in the first place, and then subsequently ignored all the information in the statements they kept sending him, then he does not sound competent to be managing his own affairs - and probably hasn't been for some years now. Waking up to that realisation is going to be distressing for him.

I can well believe that there are some dodgy practices among the equity release people. But even allowing for that... ignoring years of mortgage statements (and either forgetting the terms of his loan, or never understanding them in the first place) is just not something a reasonably competent person would do.

He is probably having to revise his estimation of his own abilities, in a very painful way.

I would ring someone like a debt management company who can help

i mean how it ago did he do equity release?

I think it should be made illegal to do life time mortgages and for those who don’t realise the effect it will have.

I'm so sorry to hear this. Do you know when he took this out?

I had never heard of this either until last week as my DP's elderly relative has died and he had got this on his own house. In the case of this elderly relative he got £6k worth of funds 20+ years ago and the amount he 'owes' has just grown and grown to now exceed £200,000. So when his family now sell his house they will inherit almost nothing. My DP thinks these equity release things are positive thing but to me it sounds like a complete scam: the old man got £6k and the company are getting £200k!!

Yes, it's difficult to get your head round I know! There were some very difficult conversations at that point, but he's always been someone who hates paperwork, discussions about money, etc, and would prefer to have his head in the sand rather than go through things properly.