My grandad completely forgot he took out a lifetime mortgage

[hobbitum]

A few hours ago I didn't even know what a lifetime mortgage was and wish I didn't now!

My grandad is 90 and thought he had paid off his mortgage. He was getting annual statements that he was putting to one side and not looking at properly thinking they were just a formality.

He was informed this week a new provider was taking it over and his friend saw the letter and realised what has happened. He has made no repayments or paid off any interest for who knows how long.

My grandad doesn't remember taking this remortgage out and it now looks as if it will take his home and every penny of his when he's gone.

The more I find out the more I'm worried there is no recourse and his own awful mistake. He's devastated, completely shocked and feels a failure - I think this will seriously affect his health which is my main concern. He is of sound mind.

I don't know why I'm posting here to be honest - surely mortgage lenders should be checking in on customers like this and doing a bit more than just sending standard letters and waiting to take everything when you die? I just don't know how he could have got himself into this situation. What on Earth can I do to help?

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.

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

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.

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.

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.

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.

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.

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?

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.

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.

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

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.

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!!

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.

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.

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.

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.

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!

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.

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.

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

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 🙄

@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

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