My grandad completely forgot he took out a lifetime mortgage

As long as he isn't going to get kicked of the house there is no real issue other than inheritance. I'd reassure him about his security,

@Gasp0deTheW0nderD0g am I right in thinking the Apr in your example is over 125%?

It's stressful. I'm stressed reading it.

My PIL did something similar, so a very desirable property will not generate any benefit for their children who will be left with the burden of clearing and selling it, for the benefit of the bank. 65 years worth of hoarded junk.

I think you need to reassure your grandfather that everything is fine. It won’t affect him, assuming he doesn’t need to leave the property before his death. Well at least the equity won’t be eaten up by care home fees!

We all thought my PIL were very short sighted, as they could have sold up and bought somewhere more suitable. But they refused and ended up trapped there. My FIL had to go into a home where he was happy enough and MIL is disabled now, confined to a couple of rooms and the place is falling apart (a bit of the kitchen ceiling collapsed recently).

I don’t blame the banks for selling the product and for
some people it’s a fair option but disastrous for many. People don’t envisage how much they may physically deteriorate in their 70s and 80s.

I don't think it's wrong to be annoyed that you've just found out a company charging extortionate interest rates has just earned your inheritance.
Anyone would be annoyed, if they say they are not, they are jealous!
I'm sorry your granddad made a poor choice, or a choice not fully knowing the repercussions regarding the repayment.
I'd go to a solicitor, if it is interest based, obviously you're better to pay it now than in a few years.

You can't end up owing more than 100%. Equity release isn't the end of the world, if someone needs the money and it is more important that they benefit from the value of their home than leaving inheritance to the family. https://nationaldebtline.org/get-information/guides/equity-release-ew/

I really don’t see the problem.

Just tell him the sale of the house will pay off the loan and you’ll get what’s left. What’s left might be zero, but he doesn’t need to know or dwell on that.

And how on earth would the lenders not have got in contact if they weren't receiving any payments they were due? This is why I suspect that there were no payments to be made and everything will be recouped on death of GD and sale of the house. I can't think of any banks that would let a non-payment situation go on for more than a few months without phone calls and urgent letters being written. Go over your overdraft limit for a couple of weeks and just see how much effort they put in to getting in touch and telling you EXACTLY how much you owe them!

I'm sure he enjoyed the money when he got it. How long ago was it? If he's of sound mind now he must have known what he was doing years ago, it would have been explained.

I'd be gutted too if I had been promised a house that I now can't get but your grandad can't have his cake and eat it. I would just reassure him that you are glad he had the money when he wanted it and that you don't need anything from him.

Legally it can't amount to more than the value of his home, you need to look into this a bit more. The worst that will happen is that when he passes away they will sell the house and there will be no money left over for the family to inherit. On the other hand, he had the money when he needed it, even if he can't remember what that was now. He will have a roof over his head for the rest of his life. Go see a financial advisor.

When did he stop paying, why and how? Something surely must have triggered that?

Are you suggesting he got an equity release loan by accident and hasn’t benefited from a cash sum?

Well so far I haven't got that urge...my children are adults now and earning good salaries and well able to support themselves.
I'm aiming not to leave anything, to enjoy spending and have an amazing retirement, must look into lifetime mortgages they sound ideal as long as non dodgy.

Nowadays they’re increasingly left to grandchildren because children are middle aged and well set up by the time the parent expects to die.

It probably is gutting but it will be as per the terms and conditions he signed up to. Did he get pleasure out of the money? Perhaps get him to focus on that.

Plenty of far younger people are absolutely clueless about money. My husband listens regularly to Money Box and You and Yours on Radio 4 (I try to avoid them, it's not good for my blood pressure) and very, very often they feature someone who signed up for some scheme offering huge returns at no or minimal risk. Then surprise, surprise, it turns out there are no returns at all and enormous risk and they are amazed. You don't need to assume they've lost mental capacity. They're either very credulous or very greedy or both. Sadly, this looks like what's happened here. The OP's grandfather was offered what looked like an amazing deal and failed to grasp how it worked and the risk of ending up with nothing left after all the interest was paid. Sadly, it happens, but things could be much worse, and the OP will now have to try to reassure him that it's OK. If he needed the money for his old age, drawing on the equity was an obvious way to get it.

I used to work for a financial publisher and had to read the examiners' reports from various professional bodies. I've always remembered the example from an entry level exam for aspiring bankers testing their numeracy and basic grasp of how interest rates work. They were asked something like this:

You are at a party and your friend Geoff offers to lend you £40 tonight. You would have to repay him £50 in ten weeks' time. Is this a good deal? Calculate the APR of such an arrangement. How does it compare with the interest rate charged on current account overdrafts at your bank?

The Examiner commented that hardly any candidates could calculate the APR and a great many thought this was a perfectly good arrangement, which was a bit worrying, as they were all working in clearing banks.

Easy to assume you’re doing a direct debit.

Because taking the emotion out of it it is all ok. In that it won’t affect him they will wait til he dies and then take the house or the money needed. . But he will be dead so he won’t be homelesss. So practically all is fine he’s no worse off than he was previously. Emotionally and morally are different questions but elderly grandad will not be out on the street.

Do you mind if I ask why you thought you were going to inherit the house. Houses are usually left to children, not grandchildren

Part of this man’s self image is about providing for his daughter. His self image has been badly dented. This will be hard to come to terms with.

He was convinced he was paying it off, but wasn't in fact paying anything. The statements came in with a list of figures for each month, but those were the figures that the mortgage was going up each month, not his payments...
Sorry, he saw amounts on his statement and assumed they were his payments, even though he wasn’t actually making any payments??

I'm totally unclear on why this would make him unhappy and unhealthy? Or what he spent the money on.

I was once at a seminar by a social scientist (sorry, I can't remember her discipline) who was researching equity release mortgages. She'd done loads of interviews with people who'd bought the products and their adult children.

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.

There typically isn't a monthly repayment amount with ERMs, the loan is paid off in full from the value of the house on death. That's why the amount grows so quickly, nothing is being paid off the capital and the interest added on top. They're very risk products for the providers as well, so the interest rates tend to be quite high compared to traditional mortgages.

Unless it's a very old product though, it won't amount to more than the value of the house.