My grandad completely forgot he took out a lifetime mortgage

Slightly different, but similar vein. Back in the early 80s when I started work, accountancy practices used to do "investment advice" which at that time didn't require the same specialist exams and experience that IFAs and Chartered Financial Planners need to do today to give advice. We did all kinds of things in that practice, i.e. hire purchase/loans, insurance brokering, pensions, and mortgages, including endowments. Mostly for our clients, but also for randoms off the street as we had the typical "office frontage" as we were also agents for a building society!

From the (almost geriatric) old school senior partner was a no nonsense approach that we were providing a service and not money making (the money was made from providing accountancy services), and that the commissions we earned from insurance, building society, pensions, mortgages etc was basically to cover the costs of the "front office", i.e. receptionists, secretaries, etc.

He absolutely hammered home to us to do proper due diligence, keep meticulous records of correspondence, advice, recommendations, warnings, etc., and personally checked every single bit of "financial advice" work that we did. (In fact he meticulously checked all accountancy and tax work too! - he was a bit of an old school control freak). Basically every letter we sent had to be signed by him, and he even insisted on seeing letters sent out by the other partners! Like I say, control freak!

But when it came to the 90s, and the mis selling scandals started, particularly endowments, but also pensions, etc., it served them well. Lots of people who lost out due to poorly performing endowments or pension firm collapses tried to sue and claim compensation via the ambulance chasing "no win no fee" compensation claim firms. Not a single one won.

Unlike lots of other firms who were found to have mis-sold, this firm had kept their files, kept their correspondence, "know your client" due diligence, copies of engagement letters, risk warning letters etc., so the challenges and claims for compo were easy to fight back against. Unfortunately, many other firms either hadn't done the same level of due diligence or hadn't kept files from years (decades) earlier, so couldn't defend themselves and basically had to roll over and pay (or their insurers did).

I do find it quite annoying whenever someone suffers a financial and there's the usual clamour of people "advising" them to claim compensation for mis-selling, as if it's always got to be the adviser/salesman at fault. Often (if not normally) there's been no mis-selling, especially in more recent times, and it's more that the person has either chosen to forget the warnings they were given or didn't take the time to properly understand the risks they were taking - lots of people don't bother to read the warnings or choose to ignore them. A bit like people criticise insurance firms for not paying out when what they're claiming for was never covered in the first place!!

The problem is that this is very common. I don’t know why - but 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.

However, that this was done in your friend’s case indicates the contact is post 2008 because prior to that there was a lot of genuine mis-selling and people were signed up without being taken through the contract either by a mortage advisor or a lawyer.

Well tell him not to worry, he’ll have his home until he dies, so he’ll be ok.

I can kind of see how this might seem attractive. Your house is worth £100k and you borrow £10k for a new car or a new kitchen or to help the kids out, so 10% of the value. You assume that the house value will rise over time and the interest rate of, say, 4% doesn't sound like much, so in your head you expect them to take about 10% of the value of the house when you die, not realising that the compound interest is going to take a far bigger chunk out.

It's "fair" in that the terms were explained at the time and they don't take your house before you die or more than the total value of your house after, but then you realise you've effectively given the whole value of your house and got the value of a car or a kitchen because you got a loan with interest and, unlike ordinary loans/mortgages, you haven't been paying it back, which would decrease the amount of interest paid over time - you're in fact paying interest on the interest.

Unless you really really need the money at the time and you can't get an ordinary loan, these seem like poor value.

That's the kind of equity release I've come across. The interest is added to the principal throughout, and the whole lot is repaid from the sale after the borrower has died.

That's why the maximum you can borrow goes up the older the borrower is, the interest is likely to be less because the lender expects you to die sooner!

There has been something of a mis-selling scandal around these though, so it's worth looking into.

There is no managing it. He will have benefitted from the equity release involved. There is no point at all in making payments. The house will belong to the bank when he dies. It’s sad that he has become confused about it. As a previous poster said, just reassure him that he has nothing to worry about. Are you sure the issue isn’t just your disappointment at the loss of an inheritance?

Currently dealing with a similar situation grandma in law. She knew about it but was husbands idea. All the money will be gone. It does make sorting out the estate more difficult as the house will belong to mortgage company so you will need to get in and sell it otherwise they will repossess.

If it’s more than his home is worth, there will be a no negative equity guarantee which ensures the amount you pay back will be never be more than the home is worth.

I do understand OP - my aunt did something similar. Borrowed in her 60s felt utterly sick when she realised in her 90s that it had all gone. But she had no kids, no husband and barely any pension so really that was her only option. And it served her well - until she realised that it had cost her her house - but she died in her 90s, warm, cared for, well-fed.. so that was fine.

You clearly have little or no understanding of what Reeves has done with this change. But you will when family farmers are put out of business because it’s impossible for them to hand down the farms to their children to work, and they pass into the hands of conglomerates whose only concern is profit.

So where should a 68 year old get the money for a new roof/ new boiler/ holiday/ new kitchen, new car? Adult children rarely have it, (and the attitude of adult kids is often the the parents are rich...live in a huge house, myth of the wealthy pensioner... not our problem). No bank will lend it, you can't get a mortgage, you can't earn it... but you have this house..... And you can't take it with you... So why should you live in a cold house that you can't maintain, not be able to afford to travel or buy presents, or buy a new coat, or see your friends, go out, or pay for someone to do the garden...? And when you're 68 you might think that you'll only live for five or ten years. And maybe you think you might as well as enjoy it while you can.

I agree. When we first got our mortgage we initially chose interest only and you have to sign something saying you understand that at the end of the term you will have to pay the loan back in full so should save for that eventuality and recognise that. They asked us multiple times about that to ensure we understood.

After 2 years we switched to repayment but they were very clear about the risks involved with interest only for this very reason.

I dont think you can really then say you didnt know. Sadly, he was ignoring all of their letters which is not the equity company's fault

I know it is not relevant, and not trying to derail the thread, but I am angry that this can happen to nice, ordinary people of relatively modest means while we have to put up with the whining from all the rich farmers scurrying around trying to protect their estates and avoid paying the tax that everyone else has to pay.

"...a company charging extortionate interest rates has just earned your inheritance."

Why do you think that they are necessarily charging "extortionate" interest rates?

My father passed away last year. I found out that he and my mother took out one of these lifetime mortgages with Legal & General back in early 2022 (so about 2.5 years ago), at a rate of just over 3% fixed for 15 years.That was a reasonable rate back then and it's looking pretty good right now.

Yes downsizing where possible is usually the financially better decision. But downsizing in old age is emotionally very difficult - leaving behind the family home and clearing out all the memories. It's no surprise some pay a premium to stay where they are.

Yes exactly. They're an increasingly normal financial product.

Yeah no way he can cancel but maybe there is something that they can do still? Defo worth the shot to try.

DM did an equity release after DF died but there was no interest as such, she was given a set amount in return for an agreed percentage from the sale of the house.

When she died I didn't notify the equity release company until after her funeral so there was no rush to sell and they gave me time to clear the house - I obviously wanted some of her belongings. Once that was done they handled the sale but only accepted an offer if I was in agreement.

To be honest in our case it was nowhere near as bad as I was expecting but I know not everyone will find that. I do know she had to take advice and I remember seeing a solicitor with her.

(I never thought I'd mention this on MN again as last time I was told we were both stupid, irresponsible and that she should have downsized)

Exactly. They are many that are quite mainstream.

This. Once a mortgage is repaid they don't send you any more statements because you no longer have a mortgage.

I'd add that there's this rhetoric about "Equity Release Companies" and while they do exist, you can get them through Halifax or Lloyds (via Scottish Widows) plus companies like Legal and General or Aviva.

Bless him and you.

my gran did the same. So yes she never had to pay it back until after she died and then it was sold and the company got the money, nothing left as an inheritance. Which was fine.

i think reassure him. Tell him you’re glad he had the money to enjoy life when he was young and fit enough. Remind him of how great his holiday was, how he needed the car, etc. even if you don’t think this just reassure him. Tell him he made the best decision. And keep reminding him it’s still his house for his lifetime. Tell him it was a win, win decision…..he got money and kept his house. Tell him you don’t need any inheritance, etc. anything just to stop him worrying because what’s done is done.

You can't just 'get out' of it: if it was missold, then perhaps there'd be a legal route, but it doesn't sound as though it was. He's of sound mind and there are options to ringfence some equity in the house as inheritance, which it sounds like opted not to do - just because he's not looked at the paperwork and forgotten about it since does not mean something untoward has happened.

Much has been made about these products being predatory, and in some cases they were missold or borrowers weren't given thorough advice (it's certainly worth OP looking into whether he took advice out originally - she should contact the lender and they might be able to help). But the chances are he took the loan out in full knowledge of what it was - lots of borrowers take equity release/lifetime mortgages out because they don't have big pension pots to fall back on. They're an expensive kind of lending, sure, but they're one people are taking because they didn't make different financial decisions.

How much did he borrow, what was it used for and what’s the interest rate? If the interest is unfairly high then there might be a case to be made. A salesman could make it appear very attractive, and not mention the large commission they would earn.

I used to work in equity release, we had a part of the form where the client had to confirm they had told their family as otherwise you could have angry relatives on the phone after death.

The number one reason for people getting it (by a long way) to pay an existing mortgage in the house. You would get people that over the years had remortgaged and remortgaged to pay for extensions or new kitchens etc and then they got to retirement they still had years left but could not pay the monthly payments on their pension.

Number two reason for taking it was to give the kids their inheritance early, so alot of people take it and then give the money to their kids for a house deposit or something.

Buying a caravan was a very popular one or home improvements.