My grandad completely forgot he took out a lifetime mortgage

As you can see from the various responses to this post it suits some people and works well for them.

I think it can also work well initially with people taking the money and ignoring the full financial facts and then being “blindsided” when reality sinks in, even though they are forewarned.

Some people used to take out interest only mortgages quite happily without any plan of actually paying off the principal loan because this was way in the future. The future then becomes the present and reality hits home.

Some people overstretched when interest rates were really low never recognising that they will increase, even though their mortgage repayments illustrated repayments at different interest rates. Then interest rates changed and they were astounded and horrified to learn about revised repayments.

For some taking ER I also think this can be true. They act in the present, ignoring the future ramifications that are spelt out and then feel aggrieved when the future becomes the present as it were. For others they are more financially responsible and understanding that there was always going to be pay back time and that they were happy with their decision making.

I also think that with the passing of time and old age there can be a tendency to misrepresent in the mind what was agreed many years ago and forget the inevitable outcome of previous actions. Which is precisely why these financial structures issue statements as to what the financial position is. In exactly the same way as a private pension issues statements of a pension fund and its status.

I’m 65 and my husband is 71. Not ready yet, but may do it. Despite what some people seem to think, not all ‘elderly’ is naive. I have my head firmly screwed on, including about finances.

But house prices have trebled over the last 20 years(more in the south-east)
So if the loan amount increasing 4-fold is enough to take up the whole of the current house value, it must have been for a large amount, most of the (then) value of the house.
If he honestly can’t remember what he did with such a significant amount of money, then his cognitive decline must be worse than you realise

@AnnieSnap if you are over 70 I would say go for it if you are under no illusions and get the figures

I have looked into these myself. It would be more like £58,000 against a £260,000 house (in the North) to top up saving. We won’t need money when we’re dead, but can enjoy it when we’re alive.

@BettyBardMacDonald and a very sensible viewpoint- my FIL is 85 and is in process of downsizing - but partly because property and location are no longer suitable. If he was staying out and short of cash to the extent it was restricting life somewhat or causing him to not maintain house or have his heating on whenever he wanted , I would certainly be telling him to draw £60k off his £550k place at this stage of life.

I don’t think you are reasonable to have expected the mortgage company to have done any more than they have. The onus is really on the family to ensure that when a person is not of sound mind with respect to legal and financial matters a power of attorney is in place. But other than that, an equity release scheme is perfectly legal and for some people it is the right thing to do. It’s not up to the mortgage company to tell customers what to do.

I don’t see how you can be really of sound mind yet forget this…

Many intelligent elderly people don’t really understand the long term implications until they get there despite being talked through the contract at the time

Maybe not, but if they sign to say they've understood it'll cover the companies - and as said, they have to look out for themselves just as we all do

In any case I'm convinced that what many really hea, at the expense of all else, is the bit about "this will enable you to stay in your own home"- which is a very powerful point to those who've perhaps got relatives persuading them to move to free up money

I can categorically say it is made very clear that it guzzles up inheritance and I can also say that those going ahead were happy for this to happen.
There seems to be a very romanticised opinion on this thread that all parents want to leave an inheritance to their children, that is not true and these parents were happy to access money knowing they wouldn't be paying it back themselves.

There are many reasons people choose to use equity release schemes and it’s their choice. If possible downsizing would always be preferable if they need to raise funds to pay off an interest only mortgage for instance. But obviously that depends on financial circumstances.

But I do agree with you regarding upkeep costs etc. My MIL needed new windows as they really were at the end of their lifespan. I offered to pay for them instead of her taking ER. But it does obviously depend on individual circumstances.

To be fair, I think in the past these products were marketed to pensioners (in a cold calling way) as a means to get a little lump sum now and avoid their property being swallowed up by care home costs. I do believe the salespeople were just that - salespeople on commission which was naturally not highlighted to the customers. Certainly I know my late MIL Did have all her faculties but was not financially savvy (as far as "big" long term things were concerned - was fine with normal expenses). She always assumed people "from the bank" were advising in her best interests and not to maximise their commission at all costs. She would definitely have assumed someone involved with this stuff would be connected with a reputable institution and not just a sales rep. Had a couple of things over the years that were picked up by us quickly and undone or stopped after a bit of a row.

You need to ask for all of the documentation, speak to an independent financial adviser to see if there is any possible recourse. If there isn't you can only reassure your grandpa everything will be fine lie about inheritance if necessary - it's better than him being distressed about it.

It is made very clear, now at least. It's quite tightly regulated now, and in the last few years anyone selling/advising on products to someone who could be considered a 'vulnerable' consumer (financially, by age, etc) has to be able to evidence very clearly that they've made the correct advice/product recommendation.

There have been plenty of cases of ER misselling, don't get me wrong, but a lot of the time the people kicking off about it are disgruntled children upset that their inheritance got spent.

I think equity release is such a scam. I've made it as clear as I can to my elderly relatives that I'd step in and provide them with capital if they were ever tempted. it would be so much cheaper for me to take out a personal loan and gift them the money then it would be for them to use equity release and see one of these companies buy their house for a pittance.

Sorry, I have read much of the thread but not all of it.

The lender cannot take everything OP's grandad has. They can take back the amount they lent him, plus interest, up to the value of his property.

If the house is worth more than what he owes, OP will still get the excess. OP will also get everything else, including the amount he borrowed through the mortgage and has not spent, if that is sat in his bank account.

If he borrowed against the property and then spent it, I don't think the lender can be criticised for expecting the loan to be repaid. The fact he cannot remember taking out the mortgage does not mean it should not be repaid.

Equity release is only any good if someone doesn’t want to leave anything to anybody when they die.
It’s a massive gift to the bank.

It should be outlawed, or at least made very clear to people that it guzzles up the value of their home very fast.

Financial cost to whom, though?

My cottage is fully paid for and if my pension runs out, you can bet I am going to do equity release. I have no dependents and while I would prefer that my assets go to charity when I die, I am even more adamant about not leaving my garden, my hundreds of books,etc.

If the time comes when some extra cash would help me stay in this house, paying the bills and maybe for home visits from a carer, it will be "sensible" for me to release equity rather than move. The charities and distant cousins who might otherwise benefit will be out of luck.

Agree, and I also wonder at the people saying the lender should have "checked in" with him from time to time. That's what the paper statements posted through his door were for!

Would be good to find out exactly when the equity release loan was taken out. If he was only 70 and has been independent until recently I suspect it would not be able to be challenged on grounds of his capacity. It may well be that he just was thinking short-term (which many of us do).

@Mirabai but that is just not true.
Saying they didn't understand is not true and doing the customers a disservice.
Every single customer, who I may add, came to us to request the product, had to confirm they had taken ifa and had to confirm they knew the implications.
These were grown adults, they all, absolutely knew that they were eating in to any inheritance but they were happy to do this.
The idea that all of these customers were not of sound mind and were somehow tricked is just not true.

It's easy for those who were expecting an inheritance to blame the provider rather than their parent was happy to reduce their inheritance.
And op please don't think I'm saying this is the case with your grandfather, I'm just trying to give an informed view on these products having dealt with many of them

Exactly. He doesn't have to make any repayments. The providers take a gamble (admittedly a fairly safe one) that the property's value will increase enough to compensate for the cost of the loan.

If Granddad's sense of security is the concern, his home is safe.

Hi op. I'm so sorry your dgp finds himself in this situation. My DM is in her 90s and she took out this type of mortgage many years ago, probably in her late 60s/early 70s. She didn't borrow much in comparison to how much the house was worth but id she hadn't paid any interest over the years the debt would be huge by now. Fortunately she did choose to pay monthly interest by direct debit so she had the advantage of a lump sum to use for home improvements, holiday ext with only a modest monthly payment back. Over the last few years her outgoings have been more modest as she doesn't holiday ext now so every few months she pays a few hundred pounds off the capital and has now almost paid it back. If she hadn't chosen to do this her debt would have been a fairly modest £25000 when she died and if course the house has increased in value over the years. She still doesn't think she's had a particular good deal even though I keep reminding her she had the advantage of a solid little sum and the remainder of her house is secure.
This is probably not of much help to you op but I'm just wondering if your dgp should have been given the option of paying the interest back and maybe the paperwork wasn't too clear about that. Legislation has been tightened up massively in late years and it's slightly possible that your grandad has been baffled by deliberately obscure terms. If this has occured there might be a slight chance he has a case against the provider. A long shot but if you can get access to the wording of the original agreement it might be worth a look.

It can be in some cases but in far too many cases it’s not optimal.

That’s the extent of their legal obligation. If the elderly person didn’t really understand the consequences - it’s no skin off the mortgage company’s nose as it’s legally watertight unless actively mis-sold and they’ve made a stinking profit.

I feel for you and your grandfather. I didn’t know how equity release worked so glad you posted. Can’t blame your grandfather.