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?

What is the risk to the provider?

I think my question would be - did he forget he had borrowed this sum or did someone take advantage of him?

Sorry, lots of questions and trying to keep up. Thanks for all the practical advice, it is very much appreciated and will be followed up. I’ll be going to see him tonight to try and put his mind at rest and see what else we can establish.

SunQueen24 no I don’t think this could have been done accidentally or unknowingly - he simply forgot about it. Not the first and won't be the last.

Yarboosucks - yes I think that is one of the questions I didn’t know I was asking - you‘d think surely no payments would trigger something, after so long. But of course that’s the business model. They’re probably delighted when this happens.

And sorry you’ve had similar experiences, Tiker, Fluffyiguana and others. I didn't actually think I'd get any replies at all!

Mortality - if the person lives forever, the loan amount plus interest will be far more than the value of the house and so they won't be repaid in full.

House prices - the loan is realised when the person dies, so if that happens during a crash (or prices just haven't risen as quickly as expected) then the loan won't be repaid in full.

Any product with guarantees (the amount paid can't exceed the value of the house) and little flexibility over timings (when the person dies the loan is due) will be risky for the provider and thus expensive for the consumer.

For those of you less sympathetic and saying it doesn’t matter and just to reassure him and it’ll be ok

my dad has just passed away with LBD. Around 5 years ago he had a LOT of work done to the house that his partner wanted. She put up most of the 6 figure sum of money (she wasn’t in deeds) as he didn’t have assets to do so, and they wrote a promissory note for repayment at his death.

all well and good. He was at time mentally competent and knew what he as doing, even if in very early stages maybe of his illness (only know that now looking back). work carried out put some value on the house, but not entirely got back at time . Arguably a crap investment of her money 🤷🏼‍♀️🙄

Then dad got ill very quickly. anyone who knows anything about LBD will know it’s a dementia characterised with delusions and visual hallucinations. And it preyed on his anxieties. This promissory note against his home became (in his head) a debt owed to money lenders, or the governement, or drug runners. It became 10x, 100x the amount he actually owed.

he’d paid his mortgage off on the house 25 years earlier, but as a younger man had had money debt issues. This new debt came back to haunt him. All his low esteem about managing money hit him head on.

it didn’t matter how many times we reassured him that he wouldn’t “loose” his home, that it was still there to go home to, (he was in nursing home and desperately wanted to go home), that the amount would be paid post his death and wasn’t an issues, it remained a persistent and dominating anxiety , at times an outright fear or a nightmare he couldn’t wake from. Some of the things he hallucinated about were like an x rated horror movie- what these debt collectors would do, torture etc . Vile. Really vile.

what I learnt from this is to burden old people with debt only repayable in their death is not a mere anxiety thst can be dealt with by a few reassuring words. It eats away at their inner anxieties, especially if needing to go into care for even short periods of time occurs.

Yes, OP GET him A LPOA. Immediately while he can agree readily to giving it to you if needed, it doesn’t have to be activated immediately. And yes, inform yourself about this debt. Know exactly what it that he has signed amd what will be financial consequences if he needs care home, or major work on house. Find out where money went that he has borrowed. Take advice here that it wasn’t “miss sold”, and follow through on that. If it wasn’t missold, do everything you can to explain how it will pan out after his death and if you needed to, invent a story why you don’t need his money. Anything to stop this turning into something that could haunt him.

You may be right that theres nothing wrong with OP being annoyed but what the hell would anyone be jealous of in this situation?
Lazy meaningless attempt at an insult

Honestly, I think he knew. He was maybe hoping the issue wouldn't need to be disclosed in his lifetime, but he knew enough to not look at all those letters. So now he feels bad because it is out in the open, but if you reassure him that you are glad he had the use of the money and it prevents the government getting it he may feel better.

The no repayments thing is an inherent part of the product design, so the provider wasn't doing anything unethical by not chasing payments. There weren't supposed to be any payments.

I suppose the risk is that the lender thinks they've 'earned' a vast sum in interest because the borrower lives for a very long time after getting the equity release and makes no capital repayments, let alone interest payments, so there's interest due on interest due on interest, etc etc. But when the borrower dies the total amount owed to the provider is more than the sale value of the house, and the law won't let them insist that's repaid out of the rest of the estate, so a lot of that interest will have to be written off.

However, given that the amount the borrower actually got in the first place will be far less than the amount owed to the lender when the borrower dies I can't feel very sorry for them.

It may have been a relatively small sum a long time ago. He may have basically forgotten where he got the money to pay for his DD's wedding/the new kitchen/the DC's housing deposit/that luxury cruise.

Sounds like something my mother in law has although it was taken out by her husband who since passed away, a lifetime mortgage so no payments are required they just take their amount plus huge interest when the person dies. The amount borrowed was about £15000 and amount outstanding is now about £185000. I can’t remember when the loan was taken out but her family did not become aware until a couple of years ago aware she was widowed at which point they spoke to the loan company as mother in law says she did not know what it really was, the loan company then produced a letter signed by her in front of a solicitor stating that she understood exactly what was involved so they have everything covered. Nothing she can do unless she could afford to pay of the amount plus any exit penalty amount they will add on. Luckily she still has equity her property so she does have the option to sell up , pay them off and then buy a small retirement place.

*i’m calling you dramatic because rather than actually get wheels in motion to get the facts

you choose to focus on a mumsnet thread about how desperate he will be in his final years*

I'm doing both at the same time to be honest clearquote. I was overwhelmed and didn't know where to start unpicking it.

I've had lots of good practical starting points from @PandoraSox @Silvers11 @CrazyAndSagittarius and more and will be checking them out, and understand a hell of a lot more about equity release than I did a few hours ago.

I'm also concerned about my grandad's mental health for this and other reasons. Being 90 isn't a barrel of laughs.

Perhaps make an appointment for him and you or a family member with all paperwork to discuss it. It seems strange. If he was meant to at for years and hasn’t surely they would chase it up after a few months. I get that he was “in sound mind” but the firm should have insisted that he had someone with him as these things are so complex even I would get confused.

That's not how lifetime mortgages work. They are a fixed amount of interest on the amount you borrow whilst you are in the property and then the amount you have borrowed is taken from the sale of the house when you die. They are actually quite a good idea for releasing some value in your home.

So you have a house worth $500K and want to release some of it's value, the company give you $100K and you pay interest on that $100K at a fixed charge of say 4% until you die. This is no different from any other mortgage. When you die the company takes the original $100K from the sale of your home.

If he hasn't been paying the 4% interest every month then that may be getting added to his overall loan of $100K.

Come on. You want to be shitty to OP, do it straight up not sly like this.

This is what I would do:
Reassure him as best you can.
Persuade him to give you power of attorney.
Find out as much as you can about the scheme.
Maybe post a factual query on the Moneysavingexpert forum.
Consult with CAB about the best way forward.
And keep on reassuring him.

So sorry about your dad Marshbird. That is so sad.

These companies get a really bad rep, but their interest charges are not usually huge, they are in line with any other interest on borrowing and if they have given someone $150K then they have every right to charge interest much like every other lender on every other type of money borrowed. The problem is people don't understand how they work and expect the lender to just give $150K out against the value of a home and expect them to realise that money back in 10/20 or even 30 years time without anything in it for them....

I think a lot of older people don't fully understand the long-term implications of it. They think: I get £15,000 now and then when I die they'll take £15,000 + a bit of interest.

They don't realise that that bit of interest is going to grow to huge proportions, particularly if they live another 20-30+ years.

And I can understand your Grandfather not looking at his statements very closely if you think of it as a loan you don't have to do anything with or have much influence over. I never look at my student loan statement closely and have no idea of how much that has grown with interest, because I know I have essentially no control over it (unless I overpaid which isn't recommended) and it will be written off in future.

15k not 150k

He borrowed a relatively small amount, now gone and certainly not invested. It is the interest and repayments accrued that is now so much more debt

@hobbitum I thought there was a thing now where they couldn't claim back more than the house is worth?

Also some schemes don't require monthly payments at all; they pay out then recoup their money when the house is sold

Lastly, you've not answered the key question so many have asked: even if a modest amount he'll have received some sort of payout, and you say he's of sound mind ... so what's it been spent on?

Ahh bless your grandad, sounds like a bit of old age related memory decline. Or it could be the onset of dementia clouding his memory, either way, it sounds like equity release. My dad took out an equity release from his home a few years ago. He was self employed and off sick with cancer recovering from surgery, he also had something neurological developing in the background and knew ultimately he was declining cognitively. There was still mortgage outstanding and he needed a few short term home adaptations he couldn’t afford. He took out the equity release lump sum, paid off the mortgage, paid for the short-term necessary home adaptations and then 18 months later had to move into a care home. His property was sold to fund this, the first people paid back were equity release, then anything left was his to fund his care. The way it works is on compound interest so the interest on the original amount increases rapidly. If your grandad has had this for a significant time period it will have eaten up much of his home equity. The new rules, not sure when the legislation came in, are that you cannot have negative equity on an equity release, so even if the amount owed increases over and above the value of the house, the estate pays nothing further and the equity release company cut their extra losses and just sell the house. You will need to check if this is indeed equity release if the negative equity rule applies- let’s hope it does. All the best ❤️

@Puzzledandpissedoff - I think OP e explained that her grandfather* *cannot remember what the money was spent on.

Like you say, it’s ‘his own awful mistake’. If they can’t take anything from him until he dies then there is no problem - except for anyone hoping for inheritance.