My grandad completely forgot he took out a lifetime mortgage

It’s not as easy as that. There is a strong urge to leave money for children. Knowing they don’t want it won’t make that urge go away

I am Power of Attorney for a friend of mine and he has a similar mortgage, equity release taken out about 14 years ago for £20,000 and he now owes something like £150,000. 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... Anyway, I've always agreed with him that the house is still his, he has a roof over his head and there's no way that's going to change, so he's over the initial shock. The startling thing is how much the figure you owe goes up over time as that part doesn't sink in when you are sold the mortgage. It's not like a normal mortgage at all, though I don't think the house can ever be under threat until after your death. This sort of mortgage is advertised on day time television still, I notice and really it's a bit of a scam though I doubt you can get them for it.

My DM has one of these types of mortgages. IIRC, you can never owe more than the value of your home. So even if you pay nothing and live for a long time, the worst that can happen is that they own the full house. There’s no extra debt, if that makes sense?

You asked if it’s worth paying now. How much is the house worth and how much does he owe? And what are his financial circumstances like? If he covers the interest every month, the debt won’t grow. If he already owes more than the house is worth it’s probably better to just let it go though.

I’m not suggesting that he should pay the mortgage to leave you an inheritance, I think it makes sense just to reassure him that you don’t need an inheritance and let it go. But if he really doesn’t want to do that, and is in a good financial position, there are options.

Do you already have a house or were you hoping to keep his house to live in?

Probably, but I do know there is a lot of disquiet about the equity release market. It may be that he should never have been sold equity release in the first place. I would definitely do some digging if I were OP.

www.telegraph.co.uk/money/property/equity-release/why-equity-release-could-next-big-misselling-scandal/

It's not uncommon to not understand equity release. After all, people think it's their money they have paid on their house, almost like a savings account. They don't necessarily understand it needs to be paid back plus interest.
Unsure how he has gotten away with not paying a monthly amount back though 🤔
It's an unfortunate misunderstanding I believe, I hope you can explain this to him. Of course it's a shock for anyone to think they own a house and they've presumably made some payments to this house before and find out they don't. Where did the equity money go though?!

Do you mean that he invested what he took out of the equity and could now use it to pay off the mortgage and more?

Why do you think he’s going to be unhappy and unhealthy? This is such a weird reaction.

My friend’s mum dies with one of these in place. The house was worth more than the amount outstanding but the terms included a clause that added a high figure on to the total every month it wasn’t sold after death. That was quite stressful for her. They will want their money ASAP when the time comes so you might feel rushed to sell.

If he’s living healthily into his 90s and the amount owed is higher than his estate then no point in worrying about it. They can’t do anything and there’s no point in trying to pay it off if there’s no equity left and assuming nobody in the family is desperate to keep the property. They can’t take more than he’s got when he’s gone

Of course look in to the possible miss selling though.

Reassure him that all is fine, he will be safe in his house until he dies or goes into care, and then his estate will get the balance (personally I'd be massaging the figures to make it sound like you'll get a nice little lump sum, but fair enough if you don't want to lie).

These products typically come with something called a no negative equity guarantee, which means that no more than the value of his house will be owed on his death, so it won't create any more debt for his estate.

If it was a lifetime mortgage, surely he potentially doesn't have to repay anything? Some lenders, all payments are deferred. He has been given the equity and the lender owns that proportion of the house. When he no longer needs it, for whatever reason, the house is sold to pay the debt.

I suggest you sit down with your grandad and draft a letter to the lenders saying you've just realised what the situation is (with the letter from the new lenders) and what would they let him know his options?Ask them if it is worth paying off some interest or capital if your grandad can do so?
If they are not helpful, if could be worth you both talking to an independent financial advisor, with all of your grandad's finances in front of you.
It is always worth talking to the lender (etc) rather than burying heads in the sand.
Good luck.

Well I do feel sorry for your grandad, yes he might be sound of mind but he wouldn't be the first - or the last - person to not fully understand equity release.... I know it's not something I'm fully competent in.
Can you try and go through the paperwork and see if you can work out when he borrowed the money, he must know what he spent it on?? .... and what he now owes?. I agree with other PP to try and re-assure him around leaving you inheritance.

Well, there was a suggestion of how upthread.

Depends on the sort of people they are really and whether they care more about Grandad or the money they now won't get.

Unless they actually advised him not to pay, it’s hard to imagine a scenario where they’d be held accountable, really?

What more could they have done? They sent letter which he’s ignored for years. They weren’t trying to hide the arrangement he just did not want to know.

It’s sad he is surprised but if he was of sound mind but chose to ignore mortgage letters there is no one else to blame. And I would question who of sound minds knows squarely nothing about their own mortgage and deliberate ignores letters?

See my post above.

"Grandad, I don't want anything from you when you die. All that matters is that you have enough money to live on now, and enjoy your life."

See my post about the FCA investigations. The behaviour of equity release firms is not always what it should be,

But how can they?

@hobbitum please, before making any sorry of payment check that the money was lent to him legally and the debt is actually owed.

Find all the paperwork and take it and him to citizens advice. Don't just assume it was done legitimately. Please!

Doesn’t sound like he’s been cheated! He was of sound mind. He didn’t read his letters properly. No wonder he’s mortified. It s certainly a lesson to everyone give post more than a glance and then go stick them in the drawer!