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 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

@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 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?

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

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.

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.

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.

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.

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

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?

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.

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

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.

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

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.

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

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.

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.

@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

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).

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!

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.

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.

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.

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.