My grandad completely forgot he took out a lifetime mortgage

Downsizing isn't always a good option either. DM had a 2 bed semi and so there really wasn't much to downsize to. She'd have most likely had to re home her animals and would have lost her garden. In her situation equity release was the better option.

The equity release company sell the house, take their cut, and hand over anything remaining to the estate.

I am pro lifetime equity release in some cases - but I do think it should be limited to 20% of equity and over 72 .

Under 72 I think it should be allowed only at 20% and interest payable monthly.

Confirming you think you understand something is not the same as really understanding the implications
That’s as far as they’re legally obliged to go. People with the capacity to enter into a contract shouldn’t be treated as incompetent imbeciles?
How could the lender possibly ascertain the extent of anyone’s understanding?

It’s a very expensive way of accessing money though. Downsizing if possible is more efficient.

My parents have equity release and are not obligated to make any repayments. It is repaid on death. We, their children, wanted them to enjoy their retirement and if our inheritance is utilised so be it.

Yes ... We were really scared too. Apparently if a private house begins to fall into a state of disrepair they can insist remedial work must be done. The fact that the Now-Defunct Council had the audacity to run a payment scheme for such work does make it incredibly dodgy! We were panicking about trying to find £30,000. Our insurance said the only issue with our house was potentially tree roots and fixed that. The Council didn't even mention it should be covered by home insurance.

They don’t though or they get financial advice from an IFA who takes a hefty commission for telling them this is exactly what they need.

Confirming you think you understand something is not the same as really understanding the implications.

The safeguards 20 years ago were slack and it led to a lot of misselling cases.

You can't restrict people's access to financial products based on whether they have children. 🙄 No one is entitled to receive an inheritance nor obliged to leave one. People are also allowed make bad decisions, provided they have all the relevant information.

That sounds very odd. They were forced to borrow money from the Council to carry out maintenance work on a privately owned property?

I live in a Terrace. Next door started to have huge cracks and start falling down. Council offered US equity release to pay for the work and provided evidence that it was our fault. Our home insurance included legal so we queried it. Next door ended up paying £30,000 for the work the Council insisted they needed (these are privately owned homes) based on the idea they paid the Council back with interest on death or if the house is sold. I dread to think how much they owe now. Do you think your Grandad might have been coerced into something similar?

@taxguru I agree- also there are ways now where those who have decent pensions can get lump sums and pay the interest-or pay chunks of it- so far less is due at the point it needs to be claimed. It has changed a lot in recent years- it is never a great idea for people pre early 70s at minimum who can't at least pay the interest unless borrowing a smallish amount in relation to equity( think15% max)

I used to deal with Shared Appreciation Mortgages, or lifetime mortgages. Every single one agreed, without exception, had to confirm they had taken independent financial advice so they knew the implications, the mortgage wouldn't be approved if borrower did not confirm this.
This was more than 20 years ago but to be fair the safeguards the lender put in place would make it very difficult to say it had been wrongly sold

You need financial advice. Free advice starts with Citizens Advice, Stepchange or the National Debt Line. If you google this be careful you don't accidentally get one of the commercial debt advisors who make money out of people's money troubles. This is a specialist area; it may be a scam so one of these will tell you what they can and can't help you with. Remember that he is the client, so they won't discuss his affairs with you, unless he has given explicit consent for you to discuss his finances with them. They will tell you what they need. Don't delay - get proper advice quickly

@hobbitum I think I read that some companies are being investigated for mis-selling these. It might be worth asking Citizen’s Advice or Financial Ombudsman. Have a look here. Be prepared though that they may deem it wasn’t mis-sold though … good luck
https://www.financial-ombudsman.org.uk/decisions-case-studies/case-studies/told-take-lifetime-mortgage-didnt-need-money

I think op explained that it's how he feels about it feeling a failure and the shock of it and that she's worried about his health and him not getting over this. So keen to stick the knife in 🙄

I second this. OP - equity release is complicated and there is a lot more to understand than with a straightforward mortgage.
I'm really sorry your grandad is struggling with this

Why? What if someone with heirs wants home improvements or a holiday and has no other way of financing it? Why should their final years of life be stifled by lack of money just so the next of kin can inherit??

I'm sure many people would get more enjoyment out of a new kitchen or a special holiday, than living in virtual poverty on a pension and then they end up in a care home and the house value gets swallowed up in care home fees meaning there's nothing left for their heirs anyway!

It used to be Wild West before the ever increasing protections and legislation etc., but now equity release is a valid option and more or less as "safe" as it can be. Of course it's costly - the lender has to wait an indeterminate number of years before the house is eventually sold to repay the debt - that alone carries a premium, plus the cost of interest for x number of years, etc.

The only "risk" I see is someone taking out equity release who isn't properly compus mentis to understand what they're doing. Not sure an IFA or chartered financial planner is the best person to undertake a mental ability check on a client, especially as diseases like dementia are often easy to hide and pass off by the sufferer in the early stages as a person can present themselves as perfectly sound mind in normal/superficial conversation. To guard against that, it really has to be the family (i.e. heirs) who are expecting to benefit from an inheritance to actually look after their elderly relatives, check their mental health, identify signs of dementia or other confusion and get medical advise as soon as possible - that way there would be protection if, say, someone with diagnosed dementia, entered into a contract, as there'd be grounds for anulment of a contract entered into by someone not of sound mind - having a confirmed medical diagnosis would help such a legal challenge to anul the contract and/or claim compensation.

Exactly that. The interest compounds and sets against the total property value. They are now all supposed to have protection against negative equity because the assumption is the house will always be more valuable than the total debt.

I think in more cases, it is not true mis-selling, but rather lack of financial education and understanding from the person releasing equity. Far too many people do not understand compound interest or pay attention to their long term financial future.

This is absolutely horrible, I feel for you. Our London neighbour took one out on his flat and the interest rate was something ridiculous like £5k a month. Just to flag it doesn’t stop when they die either, it’s when the money is paid back so you need to sort out probate very quickly to allow you to sell the home and have any ££ left to keep. It’s a shit show that keeps on taking!! We know this as we agreed to bye the flat and did it as a cash purchase to try and help the son out (still market price) but the solicitors were so slow to sort out probate!

What I would say to try and calm him is that he won’t need to pay for any of his care fees (at home or care/nursing home) which can be substantial. My Dad is only 69 and £30k a year for in home carers (4 times daily at £25 per hour) and his neighbour gets it all paid for by the council (exact same care company!!). He pays it all as he has cash savings and his house. When he needs to go into a care/nursing home the only ones you would put a relative in cost £85k a year and they make you sell your home to fund that!! So really, most people loose most of their money when they get old now!

Nobody is compelled to leave their property to any heirs that might be expecting it!
People can make any financial decisions they please, without the need to consider the impact on their heirs.

But no inheritance tax will be due on the first £1m for farmland, with 20 percent due on anything above that (half the usual IHT rate) however large the farm. Moreover, inheritance tax remains zero if the asset is passed on to heirs at least seven years before death, so unless a death is unexpected and sudden, the tax is effectively a voluntary one.
So they can stop whinging.

Honestly I think if this were my grandad I would tell him I'd spoken to the company and sorted it all out. I'd tell him what he needed to hear to be able to relax and not worry. Yes there won't be anything left once he's gone but he'll never know that.

These schemes should only be for people with no heirs, or who are really desperate for funds eg. lifesaving medical treatment. There are better ways to secure a loan. It’s not that taking money out if your house is bad but the schemes are such poor value. The adverts show couples getting new kitchens or going on holiday with the money,

It could reduce a house under inheritance tax thresholds but you’d pay double triple the amount for the saving you make.