My grandad completely forgot he took out a lifetime mortgage

We've looked at the compound interest and yep, if we live for 25 or 30 years more it looks eye watering for sure! We've discussed with thr kids that they will get nothing in the case and they have no issue with this. The house is adaptable but we can
port it over if we did want to downsize.
It's a massive thing I know but we're not going into it blindly.
We're sadly not quite the millionaire discontented boomers that we're all lumped into be, just at a stage where, for various reasons we are stuck with an IO , albeit smallish, mortgage with no realistic way of paying it off, and feel this is a solution that would work for us

I am in the position where we have several older members of the family, think late 80s, early 90s who are finding that they now have care needs.

I would think again about signing u for this. Whilst it does seem like a good idea now, is your home completely future proof? Have you got a space downstairs that can be used as a bedroom? Is your bathroom a wet room? Are you able to get in and out of your external doors easily?

My DF was great until his mid-80s. Luckily his was already in an adapted flat on a retirement complex so when his health did start to rapidly decline it was so much easier for him to cope than if he had still been in the family home.

Have a good read through the Elderly Parents section too. It’s full of posts where MNers DPs are living in unsuitable houses, often with no money for maintenance and in the middle of nowhere.

If it was me i would work out the compound interest on the loan as it can often be a bit of a reality check and consider downsizing again

There is a possibility of mis-selling here, so don't give up on that. When you've got all the paperwork you'll be in a better position to see if that might be the case. I would write to Katie Morley at The Telegraph - she's brilliant at this kind of thing.
Tbh, if your grandfather thought that everything was ok with the mortgage, it's quite possible that it was mis-sold. Or, he didn't have the capacity to understand what he was getting into in the first place.
Best of luck with everything.

It's quite simple. If you want to leave an inheritance, don't do equity release. If you have no kids / family on the other hand, it's a great idea.

I know this is an old thread, I've just read it through. DH and I are in a position in our sixties where we have a house worth a lot of money and an IO mortgage (yes we were daft!), three adult kids and lots of things we want to do.

We've explained to the children we will most likely be taking a Lifetime mortgage rather than going through the stress of selling and moving somewhere we probably wouldn't really want to be - this is ours and their home, so we want to live in t and have them back (and the flipping gchildren - love them...!) whenever they want to, and downsizing just means a lot less space.

They were wholeheartedly 'go for it' when we explained there would be little or no inheritance, which was our main worry.

Of course we have spoken to our financial advisor and he has done us the quote. No negative equity, so if the amount owed is more, no worries for the kids apart from selling dh's vast record collection and clearing stuff out -but we all have to do that at some point!

I wont lie - it is slightly scary but the pros really do outweigh the cons, the sector is hugely regulated and whilst DH is now retired, I'm not due to for a few years. Doing this means I can, or at least massively reduce my hours and we can do a lot more of things we want to do together - we've had over 30 years of raising the children and loved it, but as the oldest dc said 'This is your time now'.

People see Equity Release and do remember the bad unregulated days I know, but really, at our ages, its a hugely popular and sensible move for some.

@MichaelandKirk I'm quite pro people doing this if it's sensible amounts at a sensible age- but I do think it's better to be upfront with anyone who might need to know whilst you are in 'sound mind'

@MichaelandKirk I actually mentioned this before- a problem of not telling your family's these days if drawing down on your house ( and I understand why some don't- their own business etc ) is that further down the line family can be beavering away trying to help in downsizing/care home situations and not really being fully aware that the home isn't quite as 'owned outright' as they thought and decisions need to be made accordingly.

I am going to sound very harsh here but I am honestly sick and tired of elderly parents siging things and then bleating that they dont remember and try and become a victim. The adult child goes into battle based on what the parent has told them and guess what - they have fibbed and lied to cover up what they have done. Its then all left to the children to sort it all out and it takes AGES AND AGES.

I accept that they might have dementia or in poor health but its really not on. Where is the money they have released? Spent? Hoarded? Brought crap? Stuffed under the mattess?

LPA can be used and should be when they get to a certain age. It can run on in the background and if they want our help in the future they need to give it to us. I noticed that a PP states it cannot be used until they lose capacity but that is only true for Health. The Financial LPA can be used immediately it is issued.

DM definitely knew but as her mind was slipping (diagnosed mixed dem/alz last year) she'd forgotten all about it. It was a bit of a struggle at first trying to sort it out, but LPA lets your delve where otherwise you'd just be met with brick walls.

BTW - this was not redeemed for inheritance, rather to stop the meaningless monthly increases and have funds available for her care.

I am so glad you were able to resolve it successfully.

I don’t know if this is a factor for your DM, but we see on MN how many women even today farm out financial planning and decisions to their partners. This especially true for women of older generations with more traditional upbringing or a less than optimal education when women’s education wasn’t considered important. Too many older women have signed these contracts on the basis that their partner understands them and thinks them a good thing without really understanding what the roll up of interest implies, the porting options, redemption fee, impact on inheritors.

Three ladies I encountered personally, had no idea their husbands had signed away the house, despite the fact they had to sign the contract, they were under the impression it was an ordinary mortgage.

Absolutely

My DM and her partner (now deceased) did this around 3 years ago - they took out a later life equity loan payable on sale of house or death.
My DM is now in a home and I have LPoA, and only found out about this when the LPA became active. The paperwork said they'd discussed everything with the family and we were happy for them to proceed ... they didn't, we had no idea.
Anyway, sorting out DM's concerns, I came across an S&S ISA that pretty much covered the equity mortgage. I suggested to DM (also with approval from the rest of the family) that we should release the ISA and pay off the mortgage. All it was doing was getting bigger and bigger every month because she too, wasn't paying anything off it. The % added every month was eye-watering! She agreed and we were able to redeem the mortgage.
We were "lucky" in a sense as the debt is gone, but I feel your pain @hobbitum as it's a shock to the system when you first find these things out.

As there is a solicitor working for you when you remortgage your house as far as I am aware you have your own legal advice at the time so pretty hard to say you had no idea. I had an interest only mortgage (am in my 60s) until last year when I paid it off. Equity release mortgages are different from my ordinary interest only one (I still work full time) and all the older people know full way you lose your house when you die if the debt is higher than the house value.

It shows that lifetime mortgages are still being mis-sold and subject to sharp sales techniques contrary to your claim.

The FCA review found that over 400 financial promotions of equity release products were misleading or inaccurate. These did not fully explain the downside risk of taking an equity release product. And they found that consumers were particularly influenced by these promotions.

A consumer isn’t to know a responsible broker from an irresponsible one, they are all FCA regulated and some use that status to reassure consumers.

For some people, a lifetime mortgage is the solution they need. But it's not right for everyone, and that's why it's so tightly regulated. You will always get the bad eggs who don't do their jobs properly, which is why people need to do their research on both their financial advisors and any lenders recommend by said adviser. Not just go with Brenda next doors son because he "knows finances".

But that shows the regulators are conducting reviews and taking action where needed. Lenders can't advise, they can only rely on brokers, who should be following the right regs.

Responsible lenders also conduct regular reviews of the brokers they work with. Several have recently cut business with a really large advice firm because they want more commission than others for what is considered average advice.

It's only bollocks if you look at just the bad and not what the responsible firms are doing to help their customers.

I didn't say you had to die in the house.

But it makes it much more complicated and dependent on the lender's approval for the sake of a very small amount of money to the home owner.

OP, this is very sad. It seems clear the best thing is for you to tell him very clearly that you were in no way relying on his house or money. And that there will be no debt. And that he’s given you far more important things than money over the years (love, advice, attention, company, things you’ve learned from him etc).

In fact you could paint this all as a good thing - it means he will have a home his whole life - it means he’s been able to spend his money on other things instead of mortgage payments - it means the bank gets stuck with any leftover debt (haha) as it doesn’t travel down to heirs.

In the meantime you could quietly investigate any misselling or bad practice but to him you paint it all as no big deal and if anything a good thing.

Thanks very depressing. I have made a general enquiry with two large well known lenders though and they were both very thorough - to the point of emphasising the potential downsides, while spending comparatively little time on the good aspects.

Sorry but this is just bollocks. I quoted a 2020 FCA review a couple of pages back and there was a more recent review in 2023.

The FCA found in their 2023 review that firms were not acting on their previous recommendations. They found evidence of:

• many examples of intermediaries who were poorly considering borrowers income and expenditure
• minimising discussions around alternatives
• incentivising sales over good quality outcomes for consumers
• steering outcomes in favour of lifetime mortgages.

Those firms will have been contacted and told to shape up.

https://www.fca.org.uk/publications/multi-firm-reviews/action-needed-ensure-good-outcomes-later-life-mortgage-borrowers

My Dh is fantastic at maths and worked it out at 125% within about 30 seconds. In his head 🙄
ive suggested he might switch careers to banking

There speaks someone who doesn’t have elderly parents, or has never worked with elderly people, indeed who has never known or worked with people with different levels of intelligence, education, confidence.

The idea of blanket capacity is particularly naive - people can have capacity to understand some things but not others, it’s not easy to tell even for close family members.

How many people have - say - some aspect of physics explained to them, they think they understand it but then it later transpires they don’t? Homework is to test with students have really understood the concepts they have just been taught.

A bank loan is much more straightforward. No compound interest roll up, no clauses on porting, early redemption, ringfencing etc.

That said, I don’t really know why a not insignificant number of elderly people have got caught out not really having understood the compound interest roll up. The contracts usually have a table showing how much will be owed over the years. Does it seem too hypothetical to some? I don’t know. But the reason there are strict rules now about advisors/lawyers taking clients through each clause of the contract and explaining it, is precisely because too many got caught out in the past.

But the equity company has to agree to you downsizing because they have a major interest to protect.

They can still do that!

Its also very patronising and infantilising to suggest that just because someone is older, they must be mentally incapable of making their own decisions

Quite, @darksideofthemoons

I'm actually reminded of the sub prime lending issue, which came about at least partly because many in no position to take on debt massively resented this decision being made for them ... except that when it went wrong, they were also the first to claim they "hadn't understood" and as usual it was all someone else's fault

As said much earlier in the thread, there really isn't any legislation which can effectively shield folk from their own foolishness, or from decisions which they made quite freely but have since come to regret. The consequences aren't always pleasant, but those of removing autonomy for the genuinely able could well be worse