To think he could pay some off himself?

[Cobblersandhogwash]

My dad took out a £30k loan. One of those loans that are equity release. He has a flat. He’s spent the money. I don’t really know what on.

The loan has grown to £50k over six years. Dh and I have said we will pay this off for him but can only do it early in 2018.

We are worried that he will in effect have sold his flat for £30k. Top floor flat so when he becomes frailer, he would have to move to a more appropriate property.

But if he has to pay off this loan with the sale of his flat, he could end up with very little cash with which to buy another.

Meanwhile, he’s making zero payments on this loan. So I expect by next year, it will be more than £50k.

Aibu to be irritated by this? He should make some payments? He goes on holidays, has a cleaner, socialises lots. Has a great retirement which I’m delighted about.

Aibu to say to him our limit is £50k? But then if he doesn’t pay off the rest, our contribution is pointless as the interest will continue to grow?

My worry would be, in your shoes, that you pay off the loan in order to basically protect your inheritance but the money is needed for care costs anyway. If you want to just pay it off as a gift, totally fine. Makes less sense if you're doing it with a view to getting the asset after he dies.

I agree - you need to find more details out about the terms of the loan. It is possible he has been conned and it going to lose his entire flat to the loan company if you do nothing - but I have a feeling they are far, far more regulated than these days and it is very unlikely that a £250K flat would be as you say, "sold for 30k".

I am not an expert but a financial advisor friend is actually very pro equity release as a very useful tool for retirement - especially now it is regulated. He did tell me the details of the regulation/caps on interest etc but I have forgotten them.

So seriously, find out more before you do anything. And check out any inheritance tax implications too!

I'm going to second the recommendations for you to take some decent advice, although I would actually suggest contacting someone from Solicitors for the Elderly because there are tax and care fee consequences of your plans and it would be sensible to ensure that you structure things with these eventualities in mind. It's beyond the expertise of most lawyers who just deal with buying and selling houses so please do look for a specialist.

...the equity company won't get his flat when he dies. A flat worth £250k sold in effect for £30k.

You need to get proper legal advice. If the loan is only for 30k, then how will the flat be sold for 30k if it's worth 250k?

If it is an equity release loan then it is secured against a portion of the property so the loan amount will be repaid when the property is sold, with the remainder from the sale going to him (or to his estate). Some equity release loans allow the interest to accumulate, rather than requiring a monthly payment, so the amount owed increases.

If you're concerned I would have a look at the documents relating to the loan and possibly get some legal advice.

Best idea is paying off the loan by giving him an equity loan. Paying that directly to the loan co, and registering your loan as a charge on the property. Like remortgaging would work. Your dad will not be able to take another charge on the property without you giving permission as the charge holder.

Check the terms of the equity release. If the situation is that he can live in the property until death there is no immediate need for you to pay off the loan. You may of course be concerned about any future inheritance or how he will sell the property if he wants to move (look to the agreement). If you are paying the loan off perhaps because you are worried about interest rates, make sure this is a loan registered on the title, otherwise there is nothing to stop him taking out another loan.

Oh and its clear what he is doing with the money

Porting the loan - this is the situation where you have a property with a mortgage - you buy a new property (selling the old one) and the old mortgage is moved over to the new property or 'ported' over

The care costs issue is sorted as long as you have some sort of deed or formal agreement in place confirming it is a loan - this is your protection

I don't think it likely that the property has been sold for £30k unless there are some very bad terms in which case your father needs immediate legal advice. usually there will be some sort of limit - you must remember that your father agreed to these terms and if it is what is known in legal circles as a bad bargain he may have to go to court to get it sorted.

In an equity release mortgage there are no payments - interest accrues and it is repaid on death/sale of the property

Reachfortrhestarseveryday. I think op means that he has on,y benefitted to the tune of 30k but the equity company could eventually claim up to the full resale value - 250k - of the apartment in return. Are you sure that 50k is a settlement figure to end the arrangement. Could you pull up the deeds to check what charge the company has on the property.

< Wonder if I can slip this by my adult kids >

As previous posters have said, if it is equity release it will be paid back when your dad dies or goes into a carehome or for a fee, it can be paid back earlier, e.g. if you pay it off or he sells up. There is no option of making monthly payments on it. They are often compounded interest which means the amount goes up horribly each year, and as you say your dads loan has gone up 20k in 6 years. If you can pay it off I would recommend it. My dad took out 70k in equity release 10 yrs ago (wasted it all, and got into more debt) and it has now grown to 181k.....which is really frightening.

My parents took out an equity release for 80k. The interest is cumulative and it eats away at the capital. Some years later, when we found out, the loan was 122k (so you are then paying interest on 120k). Had we left it, all the equity in the house would have been absorbed into the loan and the house, just as the op says, has been 'sold' for the original amount of the loan, because although you can say in the house as long as you need to, when you go, because you die or need more care or whatever, the house belongs to the loan company.

My parents sold up, invested the remainder and are now renting.

Equity release schemes are awful.

It only takes a quick Google to find out what an Equity Release loan is and that in the UK they are government regulated.
OP, I think you might have over-reacted.
Unless this IS some unregulated loan shark who has taken your father for the ride of his life.
In that case get legal advice and hang on tight to your money.

There is also a repayment fee, which in our case was about 37k.

Sgtmajormummy, this is what equity release schemes are. It's compound interest. The benefit to the elderly who are too old to take out another mortgage is that they get stay in your home till they don't need it any more.

My parents had theirs with a very reputable household name company.

They may be government regulated but they are targeting vulnerable people who need the money, and it is shocking how much interest they can charge and how much they make on the properties.

Exactly, the loan was sold to my parents by a well-dressed, well-spoken financial adviser who came to visit them at home. They bought this and a whole of life policy that is also pretty much a scam. All big name companies.

There were instances of misselling and sharply dressed sales people have been misrepresenting and profiting for forever.

Doesn’t mean this is what has happened here. I would be cautious too but I would also get all the facts and proper advice before deciding anything.

I’m glad to see some more sensible posts on the subject

Good advice on here about changing the type of the loan & porting it. Do NOT pay it off. Please don't forget about older age care. Many people will have to release equity in their homes to pay for this.

The equity release products I am familar with do not allow porting. They have to be settled but I haven’t looked at them recently so that may have changed.

Not all standards mortgages allow you to port.

Standard as in domestic from high street lenders.

Not standards which is obviously a jazz thing

There is a history to equity release plans - you could potentially lose the whole value of your house by taking out a small loan, but I was led to believe these were now more regulated (I stand to be corrected) what does the agreement say.

It might be worth while looking at the title for your father's property. Last time I checked one, the property was now owned by the equity release company and the parent was a tenant for life. Another that comes to mind is a house that was owned by the company with a leasehold title to the former owner again ending on death. Part of me wonders how people manage to take these plans out, but then I am aware of the selling practices of some of the sales people.

Moving - that's interesting - I did wonder