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 actually a really good idea so release some equity in your home to spend in your retirement. It is no different from taking out a mortgage when you haven't got enough money to pay for your home.

The problem is people don't understand them and think someone is just going to give them say 20% of their home's value and sit around and wait for it back when the person dies some years later.

If you take out a 25 year mortgage now, but get fixed rates every five years at an average of 4% you are quite happy paying that 4% interest yes?

This is just the same, the company lends you $100K and charges you 4% interest on that money, if you die in 10 years you only pay 10 years worth of the 4% but if you live for 30 years you pay 30 years of 4%. Once you die they get their original $100K back from the value of your home.

If you don't pay the 4% every month it gets added to your original loan.

Nothing at all wrong with it, how can it be illegal, it is just the same as any other lender apart from the term not being fixed because they don't know how long someone will live.

It's not dodgy at all. When you take it out you say whether you want to pay the interest or whether you want it to roll up. If you don't want to pay £x00 a month because you're retired, you don't have to. This grandad decided he wanted to take the "free money" option.

The benefits are you can have as much equity out of your house as you like and not pay a penny back yourself. A lot of people give it to their kids as a house deposit.

The gf isn't denying he took this out, is he? He just claims not to be able to remember the details.

To those who said he should have been making payments- if it was equity release, there is nothing to pay until the house is sold. He had annual letters which showed how much would be owed, and as he didn’t need to make payments, there was nothing for the company to follow up and check on. Can’t blame the OP for feeling a bit disappointed about no inheritance, anyone would be if they’re honest, but trying to make him feel less stressed about it is the best way forward, as nothing can be done about it now, seeing he was of sound mind, and everything was explained at the time. It would be very hard to prove he wasn’t.

This is awful for you all and I’m so sorry op.

My grandfather passed this year and he left savings in the bank. He lived with my parents so there was no house. He was so proud and felt reassured in his final years that he could leave something for his family and I know it will help out his children and their families quite a bit when the money eventually comes through.

Equally, when I pass, I would want to be able to leave something for my children. And I can only imagine how it will help them, and I’m sure they’ll be very grateful. It brings me much direction and happiness to save for them.

So for your grandfather to suddenly have the realisation that his money is gone, will be very hard for him I’m sure. And probably yourself too. That’s nothing to be ashamed about as far as I’m concerned. Some company has loaned your grandfather a smallish amount of money and will now reap the benefits of your grandfathers life, work, love etc. It is horrible, disappointing, enraging even.

But if there is no recourse then you have nothing to do but ensure your grandfather knows you’re ok with this. Reassure him and distract him.

Im am really sorry this is happening,

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

As the FCA report I linked to earlier illustrates, it is up to lenders to ensure that the person they deal with understands exactly how it works. Ethics aside, the companies are opening themselves up to the possibility of having to pay compensation (as with the Endowment and PPI miss-selling scandals) if they don't.

Are you in the USA?

I appreciate you having only just found out about this and actually what these financial products are. But they are a financial agreement that provides money which then involves significant compound interest added to the original loan year on year.

The lender has no obligation or necessity to check the product is still suitable as the loan money has been supplied and the terms of the loan stand.

The problem being that the compound interest over say 20 or 25 years is incredibly high and the original purpose of the loan is a dark distant memory.

But statements have been issued and ignored. The financial statements will show the current position and the initial policy will show the terms.

For some people they work well as some people may not have had the money for instance to pay off their mortgage and use this type of equity release as the way to do so. But obviously it comes at a price. The price being no inheritance left to relatives, but it’s allowed them to remain in their home.

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

This is exactly the point, @tiddletiddleboomboom
Even the best regulation can't protect against people of sound mind making decisions they later wish they hadn't - or sometimes which the family wish they hadn't - and it's not as if the principle of accrued interest is unknown

In some ways this principle's no different to ordinary mortgage interest, except that it's the householder who owns the place at the end of it, so perhaps the real objection lies in the house being "given away", even though that's not what's actually happened?

and everything was explained at the time

As the FCA report shows, many companies don't explain things adequately.

I would consider one in my position in life, house worth $1M and only one beneficiary when I die, my current mortgage on that property is $300K, instead of busting my balls to pay the $300K off in the next 5 years, I could transfer that to a lifetime mortgage and carry on paying a mortgage (the interest payment of 4% on the 300K) until I die. When I die my beneficiary will still get the $700K value in my home and the mortgage company would get their $300K back. If I didn't pay the 4% every month and I lived for 20 years that total interest amount would be $240,000 which the company would also be entitled to out of the sale of my property, which would still give the beneficiary $460K out of the sale of my home (700k-240k).

I think it's a really good idea for some people and some situations.

From experience, it takes ages to get POA, so not much use now, plus he was of sound mind at the time of the transaction many years ago, so I don’t see what she could do retrospectively. He’s secure and won’t be made homeless.

It is legal and not at all dodgy (although they were missold in the past they're highly regulated now). In the UK people's wealth tends to be tied up in their house and pensions are increasingly small. The number of ERMs being sold is increasing as people look to release equity to pay for retirement or to pass on to their children at an earlier stage for housing deposits, and they are expected to increasingly become a key part of retirement planning. They can also be used to release equity to pay for care at home.

They're a very useful tool to allow people to stay in comfort in their homes in old age, but they do limit the inheritance that can be passed on.

That is such a thoughtful post, that certainly reflects my situation.

In this case, the loan provider lent £15K not £150K and the debt is now £185K. That's a lot of interest.

Did he take the remortgage out? Did someone else do it? Ask to see the original paperwork just to make sure, I would also question what he needed the money for as well as checking bank details of where it went

Good point- seeing he was of sound mind, it’s strange he forgot that he had taken it out!

@hobbitum you could ask for a SAR - or fill it out on behalf of your grandad - then they have to provide you with all the data they hold on him and have sent him.

(check ICO website for more details)

I can understand the shock and not understandingit but you need to put it into context. He doesnt need to be upset and you need to do an oscar worthy job of reinforcing that it doesnt matter.

Will he loose his house... no
Will he have to pay it back... no
If there isnt enough in the estate Will you be liable.. no itll be written off.

His fibal years can be comfortable and worry free if you manage to help him see that thats all that matters. Youve sad youre not worried about an inheritance (good for you) although this is the heart of the issue. Reassure him that its not important and that all that matters is his comfort now.

It's a way for an older person to get maybe £10,000 to spend on a car or a cruise or a new kitchen.. which often ends up costing them £200,000+ of their assets.

It seems dodgy to me too!

I guess people would argue the older person got value from whatever they spent the £10,000 on and they only 'lost' their house when they died, so arguably it didn't affect them, only their descendants.

This ^^ 100%.

This is how you reassure him and help him.

It's his money and his home after all.

Thank you, that was suggested earlier too and is on my to do list.

Thank you, I think the main thing here is, and others have explained this too today, that rules have changed and they won't be chasing any negative equity when he's gone. This is something he would worry himself absolutely sick over so will be heading over tonight to start reassuring him of this.

The title literally says he completely forgot. I’m not saying he did or didn’t, I’m just saying that if I were her I would be making sure there’s no one else that’s had this money instead. We don’t know if there was a previously dodgy partner or other family member do we. I would certainly be getting the original documentation from the company and checking bank details and signatures.

I stand by what I said, a man of sound mind does not simply forget he’s signed his entire house over. A loan or a pension yes you forget about - this is his entire house.

Not particularly relevant to the thread, but it's important people understand compound interest. 4% p.a. on 300k over 20 years would be 357k in interest, not 240k.

300 x 1.04^20 - 300 = 357

That's Equity Release

There were no repayments to make

All he needs to find out is if there's any equity left in his house

But the money's gone somewhere...