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?

I think just tell him you have got it in hand, you will seek any redress possible but that at the end of the day it's only money and his health is more important.
I'm sorry for the stress this must be for you OP, and even though it's only money, money can make a big difference and I am sorry that you won't now get what he hoped to leave to you, maybe because he stuck his head in the sand, or wasn't on top of things, or maybe because the system is deliberately stacked against the borrower. It is what it is, can't change that now. See where you stand and go from there.

I was thinking, there's no way I'd sign myself up for any of that work. Wouldn't be acting as executor. Let it all be the bank's problem.

Then focus on reassuring him that it doesn’t matter to you if you inherit nothing and you are happy he had some money to enjoy at the time he needed it.

It sounds like equity release. He should have oaud interest I'm guessing, but hasn't. I'd get PoA abd ask the new company to give me all the paperwork (Subject access request).

You're right I think. I just did a quick calculation in my head and paying back 50 when you borrowed 40 is 25% and then there are 5 sets of 10 weeks in a year, so something over 125, as there is an additional 2 weeks I couldn't be bothered to work into the calculation!
But - if the loan were to continue past 12 weeks the APR would be very much more wouldn't it, as the interest would be mounting up further!

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?

From anything I can think of, anything it was spent on would have been around 20 years ago or more -a car (long gone) or a holiday, possibly. Nothing that will have increased in value if that is the issue.

Have you checked his bank statements that he did indeed see the lump sum and this wasn’t a fraudulent application in his name?

Its strange for him to not have a clue if he’s of sound mind.

Are you worried your inheritance has gone. He must have known what he was doing at the time.

Sorry this has happened to him. If it were me I would be concerned that someone has persuaded him to take it out and taken the money. I have experience of this happening in my own family.

If he's 90 it was quite possibly a relatively modest amount 30 years ago, it's really not so crazy that he doesn't remember unfortunately. Quite possibly a high interest rate if it was a long time ago, I don't think they tend to track the base rate, it's fixed for the term (open to correction on that).

Hmm @Almostwelsh maybe yes compound interest required. No wonder people get in a mess!

Ah, thanks, PaminaMozrt; foolishly I missed that bit, and though it seems a bit at odds with the comment that he's of sound mind I'm pretty confident this will be a common thing when families "find out" about the arrangement made

I doubt it'll wash with the equity release company, who reasonably enough will have looked after their own interests, but like others I wonder if there's more to this which OP hasn't been told

Edited to mention that you updated while I was typing, @hobbitum, so sorry for missing it. I guess that if he spent it on a car or holiday - in other words something to enjoy personally - at least that's better than if he'd somehow been cheated out of it

I'm sorry your grandad is so upset but not sure what you mean by recourse?

If he took it out when he had capacity then he was fully aware of what it meant and should have read the terms of the agreement. Plus, he would have been getting letters annually about it- what happened to those??

I dont think saying he forgot will do anything unless it can be proven he had dementia when it was taken out otherwise everyone could say that!

You cant argue that older people shouldn't be allowed to release equity as thats hardly fair on those who need it and have fulll capacity to make their own financial decisions.

all the more reason to remember though surely - signing your entire house over in your 50s?!

I think this is the issue, loans taken out a long time ago which seem a good idea at the time and not fully understanding how they work, they could be going for many years with interest added.

So a lifetime mortgage is something you can take out to get some equity release, then it just sits there accumulating interest and never being paid back until the owner of the house dies (or sells?) at which point the by now huge sum is paid for out of the estate? I'd never heard of this before and they sound incredibly dodgy! How is this legal? And what are the actual benefits of signing up for one - surely the person taking it out must be aware that they're basically signing away any chance of their kids owning their house, unless they're rich, in which case they wouldn't need a lifetime mortgage in the first place...?

I'm not sure, at first I wondered if the lenders had more responsibility to check in with customers and check the product was still suitable, especially of a certain age. Wishful thinking. At least his home is secure and guess we need to focus on that.

Why should she get Power of Attorney over a man who is sound of mind when it's for now and not for future use?

Yes this is the shock we've all been dealing with today so (apart from some snarks) it has been really useful to have the discussion on this thread.

Because it may come in useful in the future. It’s much harder to get POA when someone is not of sound mind.

What's the actual problem with it as long as done legally and ethically? An old person wants some money so they borrow on the house. They don't need to be able to pay it back because they don't have too many years left. I don't get what's wrong with it in principle unless you're an entitled child moaning about an inheritance (not that OP is).

I'm not sure, at first I wondered if the lenders had more responsibility to check in with customers and check the product was still suitable

Presumably they did do that with the letters- but he put them aside you said and did not read them?

They probably have to put it in a letter for legal reasons so it's written down and there is evidence they have communicated with their customers.

I mean, what more can they do?

Yes, the POA would be a good idea even if none of this was happening.

Yes, but the suggestion was for now so that OP can interfere in his equity release.

Given that he took equity some 20 years ago, then he will have been paying the equivalent of compound interest on that release of equity all this time and so it can easily be four times the original amount.

The property will have gone up in value during that time, so as a percentage of the value of the house, the debt might not have gone up so much.

Definitely worth working out exactly what was the original equity paid to him, and the interest rate. If the value of the property has gone up a lot, and the proportion that he enjoyed for a car and holidays several years ago is similar to the current debt, then this idea may be some comfort to him now.