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?

Even if there is negative equity, unless he has other assets it's moot. There'd be nothing to pay it from, so the lender would simply have to take the shortfall. If there is anything else, I think funeral costs would also be paid first before any outstanding debts too.

Perhaps it's more efficient but unlikely to be appealing to an elderly person who doesn't want to move and just needs enough money to continue to live comfortably in their home.

Yes, you get an illustration - the same as a normal mortgage illustration that tells you how much you'd pay if you stayed with that lender for X years on Y interest rate. People don't read them though, do they!

It really is not a weird reaction at all. You obviously have never had a elderly close relative who worked all their life and their one aim was to leave their property to their family.

If this had happened to my DF, he would have been devastated and no amount of reassurance would have made any difference.

Edit. Failed to RTFF before posting. Ignore.

This thread is very educational!

@Mirabai at no point did I say I sold these products.
If you must know my role was to speak to customers, AFTER, they had said they had gotten IFA and confirmed that they understood the product.
For some, after discussing with myself or colleagues concluded it wasn't for them but there were far many more who were happy to go ahead, knowing exactly what the implications were. If at a later stage their children decided they were unhappy that they weren't getting the money they expected that is a family matter. As I said previously those that weren't happy with the product seem to be the children not the actual customer, who got the cash they wanted without having to pay a penny of it back whilst living in their house.
This product worked for many customers, as has been proven on this thread.

Well maybe Mumsnet isn't for you as we only ever get OP's version of events and if you automatically disbelieve the OP due to your life experience and innate cynicism, there is no point in you posting as you are providing neither support or advice.

As someone who has dealt with lots of wills and probate situations my only suggestion would be that if he wants to minimise the impact on OP that he gifts her any chattels he may want her to have now, in writing (assuming these have no great financial value / sentimental) and then either re-makes his will appointing someone other than OP as executor or destroys it altogether leaving him intestate. That way at least he can rest assured that OP will have any sentimental items and not have to deal with all the post death executor stuff just to pay off the loan.

If someone's one aim is to leave their property to their family they don't do equity release. Clearly that wasn't this gentleman's priority. That's ok. For some people the aim is to work enough to live comfortably until death and to die owning nothing.

Nothing the OP has posted amounts to evidence that this was missold.

The interest is compounded over time so if he took it out younger but has lived until 90, that's where the problem lies. Lifetime mortgages can be the solution for many older people who have equity but are cash poor, but you need to understand how they work to decide if it's right for you

This really. Equity Release is set up so that the borrower never loses their home, it’s a built in guarantee. Traditionally you don’t make repayments of any kind, including paying off the interest. It’s designed for people to be able to utilise/enjoy the equity in their home whilst ensuring they stay in it until they die, at which point the lender is paid back whatever is owing with any remainder going to the borrower’s estate. The only downside is less money to leave to whomever is left to inherit. So he just needs to be reassured that that doesn’t matter, and that his happiness is all that counts, no one needs his money after he’s gone.

We found out my grandparents had taken out equity release when they had passed away. They had borrowed 11k in 2006, with the interest etc the repayment was £55,000 when the house was sold. The annual statements we found however did show the final sum that was to be paid back, does your grandfathers not say the same? Im not an expert but depending on how much he released it will just be paid back from his estate once he’s passed. They value the house when they ‘offer’ the equity release so have an idea on what the house will be worth and if it will cover it. As for now, he will still have his home which is the most important thing. I’m not a fan of equity release but I did read through all the paperwork and it was pretty iron clad from the companies point of view!

Surely it depends on the circumstances. DM was widowed at 67 and needed money then, not in 5 years time.

I don't know if the type of equity release she did is still available or if there are only lifetime mortgages now. She knew that, whatever happened, she would have some equity left in her home either to use for care fees or to leave in her will.

@PinkSparklyPussyCat Yes I can see it's individual- I think under 72 though it may be wiser to bring in the % of house option based on value at the time, or that interest has to be paid - and it can be changed at 72. If necessary pay interest from amount drawn down- you didn't mention it but most people in that situation would be getting life insurance monies too come in - or should be.

I think one big problem is years ago people were drawing the odd 20k for new windows/boiler/caravan etc- So amounts were not huge but nowadays I've read people with plenty of equity drawing 100k at 60 simply because they don't want to work anymore and that will absolutely rocket if they live to 90 etc if they choose to pay nothing back.

To be honest it's their money- and I'm all for people making their old age comfortable if they can - but I think secrecy is a big thing and many children are in for a big shock if planning care home situations or even inheritances based on houses worth xyz without realising the elderly person has actually got little equity..

With a lifetime mortgage the lender requires you to take out life insurance so that when he dies the insurance takes over the remainder of the mortgage. Maybe look for documentation of the full mortgage agreement and contact the lender.

Thank you, that is some food for thought.

Thank you, am going back today to look for more documents so will look for that too. I saw that insurance was a requisite of the mortgage... but so was telling any beneficiaries and he bloody well didn't do that!

lasting POAs ( the modern version) are now recommended for ANYONE with any assets or cares about decisions made about their wellbeing

you write them and appoint your attorneys whilst you ARE in sound mind ( or have mental capacity as it’s now called).

only if and when you are mentally incapacitated can your attorneys apply to activate it and step in

that can happen to be anyone who is run over by a bus ( so to speak ) and is in a comma for a relatively short time, to someone sectioned under mental health act ( which can also happen to anyone ) to mental decline associated with dementia

To activate it has to be signed by doctor to say person doesnt Have mental capacity

you can also create rules in LPOA to give permission to be an attorney to B.C. act on your behalf to do CERTAIN stipulated things. So you could ask for you children to step in and help run your finances and deal with bills etc if you’re getting old or even, like my relative, asking me to pay bills and run their home when they’re out of the country living a life travelling the world in their older age. I have xx access to their current account to pay bills, do any maintenance etc needed

I have had my 2 LPOA ( one for legal finance and other for heath ) for years, since I b first had will - talking 40 years ago . I have an expression of wishes the LPOA refers to that I update as and when .

not needed to activate up till now. May never need it . But if I do it’s all ready to activate. Attorneys have copy too .

you can write your own, don’t need solicitors unless it’s complex.

everyone should have one. You don’t know w f ars round the corner at any age

No problem

Being an executor is a PITA, and I would never do it if I didn't stand to get anything, at least a fee, or the satisfaction of doing a job that benefits others in the family efficiently and carrying out your friend or loved ones wishes - not just clearing debt.

Doing it, with all the kerfuffle of selling a house, simply to pay off a mortgage and be left with nothing, just wouldn't want to go there!

You can of course resign as executor, but its better never to be in the position if there is nothing in it for you.

Surely you mean buildings insurance? You generally have to agree to have that in place if you have a mortgage, so that the house rebuild would be covered in the event of a fire or similar.

An older person is unlikely to be able to take out life insurance, the cost would be astronomical! The lifetime mortgage is repaid on the death when the property is sold.

Surely he would have had to pay monthly for the insurance, and as it appears he wasn’t paying anything, wouldn’t the insurance firm have queried it, and does it also mean there is nothing to pay the remainder of the mortgage? Does that mean his relat have to make up the shortfall?

They have changed since they first came out. The types I enquired about don’t need insurance (I haven’t come across any that do). They calculate what percentage of the house’s value can be borrowed based upon the market value of the property and the age of the borrower. Some come with an agreement to pay the interest. Others (my preferred choice) have nothing to pay during the lifetime (although payments can be made) and there is a guarantee that the debt will never come to exceed the value of the property.

But it doesn't just "happen."

An adult in sound mind made the decision to essentially sell their home to the bank; in exchange they got ready cash AND the right to live in the house until death.

That was a proactive choice on the part of this gentleman and many others. Ignoring statements arriving at one's home is a proactive choice.

These programs are costly for obvious reasons but they aren't scams. And most 70 year olds aren't so vulnerable as to be unable to comprehend the terms.