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?

Experience. Which has resulted in cynicism.

It's a shame that with all your wordly experience you haven't come across any situations which might lead you to consider: you know nothing about OP, her family or her finances; you don't know if the grandad has spent the last few years reassuring her that he'll 'not see her go without' due to whatever trauma/ financial difficulties may have presented; you don't know if the grandad has a strong sense of pride and an inate desire to leave money behind, so even if the OP doesn't give a shit she is mindful of his feelings and is validating his perceived needs. Maybe you could pipe down and do some reflection.

Yes, but OP's granddad is 90. He's not starting another phase of life is he?

@Gwenhwyfar my FIL is 85 and exchanging next week and has an ongoing purchase too. I think people can have equity release in their 60s and still make further changes to circumstances, but to be honest they need to be making that decision either if they are actually paying the interest- in which case it makes no difference, within 10 years of equity release if they have been paying nothing or have an absolute boat load of equity so the release is a very small portion of the equity - even with compound interest or are moving to a rental. It's a really individual thing - but definitely your options are going to be limited if you have borrowed a fair old chunk on a very modest home and been paying nothing back at all for 15 years plus.

I worked in lifetime mortgages for many years.

Contact the provider of the lifetime mortgage and tell them your concerns. They won't be able to discuss it with you, unless your grandfather gives you third party authorisation, but they will (should, if they are responsible) conduct a review of the account and look at the application to see if there is any sign the adviser did anything wrong.

Standard practice on a lifetime mortgage is to contact the customer during the application process if necessary and on/after completion to confirm. Then customers are left alone other than the annual statements, because the point of the lifetime mortgage is that the customer has the money they needed/wanted and still owns their house, the provider simply has a right to equity from the estate, or when the customer wants to pay it off they can. There's no reason to contact. Occupancy checks are carried out via the electoral role to make sure the customer is still resident and if any concerns are raised contact will be made.

Responsible advisers should encourage customers to discuss with family members so there aren't surprises or challenges later down the line. Your grandfather will have had independent financial advice and independent legal advice, as that's a regulatory requirement of the lifetime mortgage.

There should also be a no negative equity guarantee, so if the house hasn't increased in value over the years, there won't be anything to pay over and above the value of the property.

Hope that's put you a little at ease, but if you're really concerned, contact the provider.

This isn't a requirement of all lenders. Home insurance is, but life insurance isn't.

It's fully regulated these days and customers can't take it out without independent financial and legal advice. It's basically impossible for it to be mis-sold now, and IFAs need to be specially qualified to even register with a lender to make an application.

You can use a lifetime mortgage to purchase a property. You can port a lifetime mortgage. You can repay without early repayment if the new property doesn't meet lending criteria. In terms of moving home, it's very similar to having any mortgage, except you're not obligated to make any repayments.

Well I was talking about these lifetime mortgages in general terms, not specifically the OP’s grandad.

But arguably many people in their 80s and 90s ‘start a new phase of life’ as their mobility or health declines. And it’s not uncommon for older people to want to downsize / get a bungalow / move to be closer to family.

I doubt he fully understood the implications , many people can't comprehend that a small equity release would convert to the whole equity in the house. Most of the blurb shows happy pensioners on a cruise or something and loving life, he probably thought and it was possibly implied that they would take a lot lower proportion of his equity after his death , still leaving some to his relatives . If he has savings left he may be able to gift small sums or buy something sentimental to remember him by.

Thing is, @jessycake, whatever was thought or implied the updates on what they'd be taking would have been included on every annual statement, and it's hardly their fault if he didn't bother to read them

Since it appears there'll always be claims of "they didn't understand" no matter what's put in place, it seems all that's left would be to ban equity release completely, effectively suggesting that nobody can be trusted to take all the T&Cs on board - and I'm not sure that's very fair to the many for whom it works perfectly well

Yes, and as a PP said you can do all of these things with a lifetime mortgage. Port it to a bungalow, or repay it. You don't sign anything to say you'll die in that house.

Yes but they tell you what the consequences are and you sign to say you understand them. It's no different to anyone of any age taking out a loan and saying you understand the repayments - and then later on saying "but I didnt know- I dont understand the concept of interest!".

If people dont fully understand what they are signing then they shouldn't be signing stuff- they should get someone else to check it for them or give someone they trust POA. Either someone has the capacity to understand their decisions or they dont. As @Puzzledandpissedoff says, the only way around this is to ban anyone over age 65 making their own financial decisions and that is hardly fair to those who are aware of the risks - its also very patronising and infantilising to suggest that just because someone is older, they must be mentally incapable of making their own decisions.

The only caveat to the above is if they dont explain and it was legally mis-sold but if the paperwork explains it and he signed it then they havent broken the law.

Its also very patronising and infantilising to suggest that just because someone is older, they must be mentally incapable of making their own decisions

Quite, @darksideofthemoons

I'm actually reminded of the sub prime lending issue, which came about at least partly because many in no position to take on debt massively resented this decision being made for them ... except that when it went wrong, they were also the first to claim they "hadn't understood" and as usual it was all someone else's fault

As said much earlier in the thread, there really isn't any legislation which can effectively shield folk from their own foolishness, or from decisions which they made quite freely but have since come to regret. The consequences aren't always pleasant, but those of removing autonomy for the genuinely able could well be worse

They can still do that!

But the equity company has to agree to you downsizing because they have a major interest to protect.

There speaks someone who doesn’t have elderly parents, or has never worked with elderly people, indeed who has never known or worked with people with different levels of intelligence, education, confidence.

The idea of blanket capacity is particularly naive - people can have capacity to understand some things but not others, it’s not easy to tell even for close family members.

How many people have - say - some aspect of physics explained to them, they think they understand it but then it later transpires they don’t? Homework is to test with students have really understood the concepts they have just been taught.

A bank loan is much more straightforward. No compound interest roll up, no clauses on porting, early redemption, ringfencing etc.

That said, I don’t really know why a not insignificant number of elderly people have got caught out not really having understood the compound interest roll up. The contracts usually have a table showing how much will be owed over the years. Does it seem too hypothetical to some? I don’t know. But the reason there are strict rules now about advisors/lawyers taking clients through each clause of the contract and explaining it, is precisely because too many got caught out in the past.

My Dh is fantastic at maths and worked it out at 125% within about 30 seconds. In his head 🙄
ive suggested he might switch careers to banking

Sorry but this is just bollocks. I quoted a 2020 FCA review a couple of pages back and there was a more recent review in 2023.

The FCA found in their 2023 review that firms were not acting on their previous recommendations. They found evidence of:

• many examples of intermediaries who were poorly considering borrowers income and expenditure
• minimising discussions around alternatives
• incentivising sales over good quality outcomes for consumers
• steering outcomes in favour of lifetime mortgages.

Those firms will have been contacted and told to shape up.

https://www.fca.org.uk/publications/multi-firm-reviews/action-needed-ensure-good-outcomes-later-life-mortgage-borrowers

Thanks very depressing. I have made a general enquiry with two large well known lenders though and they were both very thorough - to the point of emphasising the potential downsides, while spending comparatively little time on the good aspects.

OP, this is very sad. It seems clear the best thing is for you to tell him very clearly that you were in no way relying on his house or money. And that there will be no debt. And that he’s given you far more important things than money over the years (love, advice, attention, company, things you’ve learned from him etc).

In fact you could paint this all as a good thing - it means he will have a home his whole life - it means he’s been able to spend his money on other things instead of mortgage payments - it means the bank gets stuck with any leftover debt (haha) as it doesn’t travel down to heirs.

In the meantime you could quietly investigate any misselling or bad practice but to him you paint it all as no big deal and if anything a good thing.

I didn't say you had to die in the house.

But it makes it much more complicated and dependent on the lender's approval for the sake of a very small amount of money to the home owner.

But that shows the regulators are conducting reviews and taking action where needed. Lenders can't advise, they can only rely on brokers, who should be following the right regs.

Responsible lenders also conduct regular reviews of the brokers they work with. Several have recently cut business with a really large advice firm because they want more commission than others for what is considered average advice.

It's only bollocks if you look at just the bad and not what the responsible firms are doing to help their customers.

For some people, a lifetime mortgage is the solution they need. But it's not right for everyone, and that's why it's so tightly regulated. You will always get the bad eggs who don't do their jobs properly, which is why people need to do their research on both their financial advisors and any lenders recommend by said adviser. Not just go with Brenda next doors son because he "knows finances".

It shows that lifetime mortgages are still being mis-sold and subject to sharp sales techniques contrary to your claim.

The FCA review found that over 400 financial promotions of equity release products were misleading or inaccurate. These did not fully explain the downside risk of taking an equity release product. And they found that consumers were particularly influenced by these promotions.

A consumer isn’t to know a responsible broker from an irresponsible one, they are all FCA regulated and some use that status to reassure consumers.