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?

It’s no different to my inlaws who spent their endowment policy money then were shocked when the mortgage needed paying off !
There are now stringent rules around equity release/lifetime mortgage but if he did it years ago he might have been badly ‘advised’ .
He must have seen the balance going up year on year if he had statements though?
Iirc, they can only take the house, even if the balance exceeds the value.

I think you are probably just going to have to keep reiterating to him that him living out his years happily is worth more to you than any inheritance would have been. It might be worth looking up some psychology type stuff on how to settle his mind by using the right phrases etc. Good luck, I hope you manage to reassure him that it really doesn't matter.

I would go back to the lender and ask for copies of the financial planning meeting that took place when this happened (with your Grandad’s consent). If it was a face to face there will be paperwork from the time and if it was over the phone there will be documents that he signed.
Start with the original sale and understand what happened. If you still have cause for concern lodge a complaint with the lender regarding your Grandad’s understanding of what happened and the long term implications. If you are not happy with their response you can refer to the Financial Ombudsman (provided the original lender is regulated). They will take an independent look and see if your concerns are warranted.
I wouldn’t just accept it as done and dusted.

I'm going to be perfectly honest and say I don't know! Decades ago I could do those sums with the instructions in front of me, but now I can't remember. I just know it's far more than a commercial loan or overdraft would charge and that was the worrying thing about the examiner's report - the young bank clerks taking the exam didn't grasp that at all.

@hobbitum First thing to do is find out exactly what he signed up to. There are different options for Equity release of which a lifetime mortgage is only one.

Also, if he hasn't being paying anything towards it, it would appear that he didn't have to - or the company would have been chasing him for payments. I would have thought? You also need to check what his contract said about the repayment to the company not exceeding the value of the house. Nowadays, it isn't possible for that to happen. They can't take more than that, but if he took it out a while ago, I'm not sure what the score might be for his home

Then you need to check that he wasn't mis-sold the equity release. Please arrange to speak to the bank or whoever he took out the money with and get all the facts on what it actually means for the house and your Grandad.

In the meantime reassure him that he has a home, he won't find himself without one and that doesn't matter to you (even if it does)

With lifetime mortgages- these days there are options to pay interest, just draw down in small tranches etc , a lot has changed- far too many were doing this in their late 60s and early 70s and £40k was turning into £120k if they were getting to 90 -

I suspect OP given the amounts you have said , then it's something like this- but clearly he had the money at some point and obviously doesn't have a home with that much value - unless of course he borrowed far more than this - to be fair a standard mortgage is no different- except rates slightly lower- if you borrowed £100k and paid bugger all back on it then 25 years later it could be £280k - due to all that compound interest

Please try and be the bigger person and say it's no big deal. He clearly knew and over the years just forgot about it or simply didn't realise how compound interest worked- even then he would have been given figures at the time

Also Op - you only have to look at the latest statement to see what the original loan amount was and what is owed now. Simple.

I thought Equity Release was basically just selling your home back to the bank. Win-win for home owner and bank, but nothing for the heirs.
Is that not how it works?

As people say, there should be a complete record of the advice he received and this should be documented and available on request.

When relatives find out about what their relative has done they often advertently or inadvertently make someone feel guilty which then almost forces the person who took it out to say they didn’t know. At 90, your GF may also have forgotten key details over time - there’s a world of difference between him not being clear about it now and not having understood at the time.

When you’ve seen the paperwork you may well find that this was all spelled out properly to your grandfather and you need to suspend judgement until you’ve seen it.

If you are as you say only concerned about his peace of mind, the key point is he’s had the money, for whatever reason he wanted it, and he won’t miss it and can’t spend it after he’s gone.

The longer he lives, the higher today’s price for the money that he borrowed a long time ago - it’s a positive that is still here at 90 but he may well have not expected to when he borrowed the money. Don’t let him feel guilty for surviving!

130% isn't it @Almostwelsh?

25% interest x 5.2 (because 10 weeks x 5.2 = 52)

I'm merely an Econ teacher though, not a would-be banker.

You just need to reassure him that he has no need to make payments, he doesn't need to worry about not having a roof over his head and that you are perfectly happy with the situation.

You can make payments but there is no need to for either equity release or a lifetime mortgage. The house will be sold when he dies, the sum repaid and any leftovers (if there are any) will be added to his estate. You will not be liable for any shortfall.

My MIL had a lifetime mortgage to enable her to move close to us when she was older, it was a great help and reassurance for her. She had it 12 years before she died and there was still a bit left over when she died.

Considering his age I would try to just reassure him now that everything will be fine, it’s a real shame but digging into why he’s done it and focusing on it as a big loss will be terrible for his mental health. I understand he will be able to stay in his home so life isn’t going to change.

There’s unlikely to be any inheritance from his estate but plenty of people don’t leave ann inheritance

"Her findings were that the children were convinced the parents didn't understand the product and had been missold. But the interviews with the parents demonstrated they understood fully. "

Yes, someone who worked for solicitors working on this told me they regularly got calls from angry children annoyed at having been disinherited.

This. Its certainly my the car that "nothing can be done". I would be starting off by doing a SAR (Subject Access request) for all the information they hold and the advice he was provided. It's ringjing alarm bells that he didn't know he had this and he's of sound mind. Regardless of the statements he wasn't reading, he should still have been given clear and appropriate advice at the beginning. A lot of these contracts were not sold without appropriate advice. So start there and then follow the complaints process to FOS if necessary.

I would also look through your grandfathers paperwork and see what he was given at the time. Make sure his records and the company's records line up.

Have a read of these:

www.financial-ombudsman.org.uk/consumers/complaints-can-help/mortgages/equity-release

www.clarkewillmott.com/insights/mis-sold-equity-release/

A lot of people reach middle age without having bought.
Also, a person of 90 might have children who are already pensioner age themselves.
In this case OP has already said she's the only close relative so that is all irrelevant.

TBF there will be some people for which equity release will work well. There will be some people who will have got to enjoy spending a tax free lump sum and then ended up in a care home. They might as well have enjoyed the cash rather than watching their cash being used for care home fees.

OP, if I were you I'd get lots of facts and figures about lifetime mortgages and show him how lots of people use them. Apparently 2022 saw 6.2 BILLION pounds in total lending with equity release and 2023 there were 65,000 new plans taken out so it's not like he is the only one.

(I've taken these 'facts' from Google so not fact checked them)

I think the main problem with equity release is that the people taking them out don't fully understand what they are doing and that the terms and conditions of them are so unfavourably to the customers.

Such sensible advice.
Stop catastrophising Op. Reassure him. It's highly unlikely that there was anything underhand about this. Remember if you do demand paperwork and other evidence from the company your grandad will have to get involved (GDPR). I'd say just be very certain that you think something wrong has happened before making him even more stressed.

There’s a world of difference between not having capacity and only skimming the small print. If the OP’s grandfather was of sound mind at the time he signed then it would be dishonest to play the ‘dotty old dear’ card now to claim it was mis-sold.

" 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."

They can just reject the inheritance.

So I think these mortgages were offered at a time where it was genuinely unforeseen what the property value would be in the future. I don’t even think you’d getting away with selling some of these mortgages any more.

You could see if you could fight it on the basis that it is not fair to the customer. There is a lot of regulation now about treating customers fairly. If a new provider has taken over it could be because the original provider wants to distance themselves from the reputational hit of being associated with these types of products.

Equity release arrangements are heavily regulated and have been for many years.

Whilst I had the specialist qualifications to arrange them it was my employer’s policy that each and every sale was signed off by our compliance dept. We had to be sure that the client had full capacity, that all other alternatives were explored and did our best to get any adult children involved if possible to avoid this type of situation.

Get hold of copies of the original documentation from the lender and see what was agreed to. You will then be able to see if there is the possibility of a mis-sale

These mortgages are still sold now! They can be a really good option for some people.

Op, please speak to an IFA. There is so much mis-information on this thread.

So sorry, how awful for your Granddad and for you to discover this now.
Since he is of sound mind and presumably not normally so very forgetful, perhaps he was mis sold the mortgage. It would be worth researching whether there is some redress.