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?

Are you suggesting he got an equity release loan by accident and hasn’t benefited from a cash sum?

When did he stop paying, why and how? Something surely must have triggered that?

Legally it can't amount to more than the value of his home, you need to look into this a bit more. The worst that will happen is that when he passes away they will sell the house and there will be no money left over for the family to inherit. On the other hand, he had the money when he needed it, even if he can't remember what that was now. He will have a roof over his head for the rest of his life. Go see a financial advisor.

Thank you @MereDintofPandiculation l, you've got it. It's not nice to have an old man in tears on the phone and he's had an incredible shock.

I know this is Mumsnet and expected the accusations of self-interest but calling me dramatic is a bit unwarranted.

I'm sure he enjoyed the money when he got it. How long ago was it? If he's of sound mind now he must have known what he was doing years ago, it would have been explained.

I'd be gutted too if I had been promised a house that I now can't get but your grandad can't have his cake and eat it. I would just reassure him that you are glad he had the money when he wanted it and that you don't need anything from him.

And how on earth would the lenders not have got in contact if they weren't receiving any payments they were due? This is why I suspect that there were no payments to be made and everything will be recouped on death of GD and sale of the house. I can't think of any banks that would let a non-payment situation go on for more than a few months without phone calls and urgent letters being written. Go over your overdraft limit for a couple of weeks and just see how much effort they put in to getting in touch and telling you EXACTLY how much you owe them!

I really don’t see the problem.

Just tell him the sale of the house will pay off the loan and you’ll get what’s left. What’s left might be zero, but he doesn’t need to know or dwell on that.

You can't end up owing more than 100%. Equity release isn't the end of the world, if someone needs the money and it is more important that they benefit from the value of their home than leaving inheritance to the family. https://nationaldebtline.org/get-information/guides/equity-release-ew/

I don't think it's wrong to be annoyed that you've just found out a company charging extortionate interest rates has just earned your inheritance.
Anyone would be annoyed, if they say they are not, they are jealous!
I'm sorry your granddad made a poor choice, or a choice not fully knowing the repercussions regarding the repayment.
I'd go to a solicitor, if it is interest based, obviously you're better to pay it now than in a few years.

My PIL did something similar, so a very desirable property will not generate any benefit for their children who will be left with the burden of clearing and selling it, for the benefit of the bank. 65 years worth of hoarded junk.

I think you need to reassure your grandfather that everything is fine. It won’t affect him, assuming he doesn’t need to leave the property before his death. Well at least the equity won’t be eaten up by care home fees!

We all thought my PIL were very short sighted, as they could have sold up and bought somewhere more suitable. But they refused and ended up trapped there. My FIL had to go into a home where he was happy enough and MIL is disabled now, confined to a couple of rooms and the place is falling apart (a bit of the kitchen ceiling collapsed recently).

I don’t blame the banks for selling the product and for
some people it’s a fair option but disastrous for many. People don’t envisage how much they may physically deteriorate in their 70s and 80s.

It's stressful. I'm stressed reading it.

@Gasp0deTheW0nderD0g am I right in thinking the Apr in your example is over 125%?

As long as he isn't going to get kicked of the house there is no real issue other than inheritance. I'd reassure him about his security,

Yes, it's difficult to get your head round I know! There were some very difficult conversations at that point, but he's always been someone who hates paperwork, discussions about money, etc, and would prefer to have his head in the sand rather than go through things properly.

I'm so sorry to hear this. Do you know when he took this out?

I had never heard of this either until last week as my DP's elderly relative has died and he had got this on his own house. In the case of this elderly relative he got £6k worth of funds 20+ years ago and the amount he 'owes' has just grown and grown to now exceed £200,000. So when his family now sell his house they will inherit almost nothing. My DP thinks these equity release things are positive thing but to me it sounds like a complete scam: the old man got £6k and the company are getting £200k!!

I would ring someone like a debt management company who can help

i mean how it ago did he do equity release?

I think it should be made illegal to do life time mortgages and for those who don’t realise the effect it will have.

I can see that the OP's grandfather must be upset. Not just about the financial situation and lack of inheritance to pass on, but about his own capacity for making decisions, his memory, and his ability to keep track of things.

Bluntly, if he has opted to take out this "lifetime mortgage" in the first place, and then subsequently ignored all the information in the statements they kept sending him, then he does not sound competent to be managing his own affairs - and probably hasn't been for some years now. Waking up to that realisation is going to be distressing for him.

I can well believe that there are some dodgy practices among the equity release people. But even allowing for that... ignoring years of mortgage statements (and either forgetting the terms of his loan, or never understanding them in the first place) is just not something a reasonably competent person would do.

He is probably having to revise his estimation of his own abilities, in a very painful way.

If it's a 'liftime mortgage' repayments are optional. You either pay them as you wish, or pay nothing. Whatever the balance is comes out of the proceeds of the sale of the house after you die.

Honestly, for some people it's a life saver. They can give themselves security and a home for the rest of their lives.

If it's an older product, maybe taken out 15 or more years ago, it's probably calculated using compound interest. So if you don't pay the interest the interest is added to the lump sum owed, and in the following year you pay interest on both. It can add up really quickly and a lot of older people got caught out. But as far as I was aware legislation was changed some years ago to avoid this. Worth taking it up with the lender and Age Concern or Money Box on Radio 4:
https://www.bbc.co.uk/programmes/b006qjnv
or any of the consumer champions for all the main newspapers:
Telegraph: Kate Morley:https://www.telegraph.co.uk/authors/k/ka-ke/katie-morley/
Guardian: https://www.theguardian.com/money/series/bachelor-and-brignall-consumer-champions

The good news, OP, is that he has a secure roof over his head and if his estate isn't worth enough to pay the debt off on his death then any debts die with him.

I can imagine that is hugely upsetting for him, and for you on his behalf. Do you think he was of sound mind when he signed up to the remortgage, It is possible it was done under some form of duress? Is there any proof that he was paid the money, or evidence of how it was used? It's awful for him. And I disagree with those questioning your motives. You sound like a loving granddaughter with your grandad's best interests at heart.

Assuming it was all above board, then I think they best thing you can do at this stage is to reassure him that you had no expectation regarding inheritance and you have been happier to have him in your life into his old age xx

We don't need to know why, and we shouldn't assume her parents are still alive.

That’s so so sad OP

Debt doesn’t come easy ( and some are just not used to it at all ) and I’m sure he intended and wanted to pass on what he could to family…..he must be devastated
Hes lucky to have someone like you to talk to about this and whilst the problem isn’t going to go away having you will I’m sure be a great help

I’m afraid that’s how equity release works. You release a small amount of equity but the interest that accrues on the loan is huge. £20k can easy become £150k over a period of time.

But he has a home to live in now and is not going to be evicted. But ultimately the finance company who originally organised this for him will now own a significant proportion of his property.

To fully understand it you need to read all his documents and statements. Basically what he agreed to under the terms.

Lifetime mortgages are still subject to compound interest now. It still really adds up, but that is all clearly explained and confirmed in writing.

Op don't make your grandad feel bad. This might have been the best thing he could do at the time. If inheritance isn't important to you then tell him that. He won't be leaving you with a debt (that's against the law now), the worst thing will be that there will be nothing left to leave you.

When the time comes the loaner company sell the property, take their money and give the balance to the inheritor. If there's no money left, or the loan exceeds the proceeds of the sale, no futher action is taken.