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?

As I understand it, for the financial POA you don’t have to wait to lose capacity to activate it. You can delegate to your attorney if you would just prefer someone else to take over the handling over your financial affairs. Obviously, grandad would have to agree.

Yep- the moment you have POA in place you can use it to manage their finances.

I got it got it when my dad was first diagnosed with early dementia but still had enough capacity to agree to it.

Also, when it came to the time of actually using it noone asked if he had given permission for it, the fact I had POA was enough to start managing his accounts.

Because you end up giving away your entire house for a relatively small amount of money. I suppose it depends if there are ways out of it, for example, whether you can pay it off at any point before it racks up too much interest.

Is it legal to fill an SAR on someone else's behalf when it affects your own financial interests rather than that person's?

"Because you end up giving away your entire house for a relatively small amount of money. "

Is that really a problem though. You don't need the money to buy your next house.

You would be paying much more than $240k interest. You will be paying interest on the interest, this is how it can spiral if you don't pay the interest on a lifetime mortgage. First year the interest is on $300k @ 4% that's $12k, so second year the interest is on $312k and so on and so on. That's how it becomes a massive number.

Many people take out this type of financial vehicle. They are advertised every afternoon on daytime tv!

The problem comes with the realisation that taking out a loan, in this way, say for a new car or a new kitchen at the age of 70 becomes a bit of a distant memory twenty years later. Some just take out equity to supplement their state pension. Others to pay off the mortgage.

The passage of time, however, can blur the fact that the money is long gone. The kitchen is now quite old, the car in the past or the £20k used to supplement a state pension has all been spent over the years. BUT the loan is very much alive and accruing significant compound interest and the property is the security against the loan.

There is quite literally no such thing as free money, apart from say a lottery win.

In fact, you are often tied into the sale of a property alongside the equity release/financial partners if money is still left in the property as they have a significant stake and can dictate the terms of the sale.

Your Grandfather may well have allowed his mind to "forget" about the initial loan money as it for him is in the distant past. But the finance company has been reminding him regularly through the issue of financial statements that he has ignored.

He didn't also choose to discuss this with his wider family (accepting you could have been far too young to be relevant.) Hence this is all news to you.

OP it doesn’t really sound like he’s forgotten, more than he didn’t really appreciate the consequences of the loan?

You can make a SAR for someone else if you can prove you have the person's permission to get the information for them. When you submit a request for someone else, the organisation will ask for proof such as: written permission from the person; or. a power of attorney document

Yes, you would need their permission, otherwise you're accessing someone's private data. Also, you dont need a "reason" for a SAR, it's a legal right. You just need to ask for it and they have to give it to you

That actually does make sense - thanks for explaining (and to the others who've explained!).

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.

Even back as far as 2001 when MIL took her equity release/lifetime mortgage out she was required to have a face to face appointment with a solicitor by herself to make sure she was able to tell them it was her decision, she wasn't being coerced and she understood what she was taking on financially. It's just a mortgage in reverse and, if you don't pay any of the interest (which you aren't required to do), you simply end up paying more than the lowest rate. They can never recover more than the sale cost of the house (if it were to reach that point).

This is exactly how compound interest works. It works well when you are saving and getting interest on your savings.

Conversely it works badly when you have a loan with interest.

I know you don't need a reason, but I would question the motive of people doing this to get their hands on their inheritance.

And is a bit embarrassed about it now. He was in his right mind when he took it out and even is still now so all this about the OP going after the fraudulent bank is a bit strange.

Equity release has been around for a long time and if for example, he took out a loan via equity release in his late 60's (or perhaps Granny did if she was around then) the high interest rates will have exceeded the total value of the house especially as he has lived in to his 90's. If you probe back far enough you should be able find out when the loan was taken out and you'll probably discover that was around the time of a new car purchase, grandchild at Uni, once in a lifetime holiday or new kitchen etc. Even a relatively small loan of say £20K could end up being £200K due back when the person dies depending on how long they live for.

Whatever it was spent on I hope he really enjoyed it at the time. All you can do now is reassure him you never expected anything from him and him just being your Grandad is more than enough.

Check the requirements of this loan. I seem to recall that some are advertised as being repayable if/when the person goes into residential care. So then he would struggle to pay for his care.

My D dad took out a lifetime mortgage in his 70s, and he hid the statements. We had got wind of it, but he was an adult in sound mind. Leading up to getting the money, he'd had a girlfriend who may have allievated him of quite a lot of savings, and then there was a caravan... dad just wanted the comfort of a wedge of cash when she was no longer on the scene. In the end, he borrowed about £28k and it cost the estate £150k when he died at aged 83. Two further things, the interest is much more than 4%, and a 'lifetime' mortgage is a misnomer. The interest carries on mounting up after death - in our case, a further 12 months' worth until the house was sold.
Daytime TV is full of ads for these kinds of financial products.

Yes jealous is completely the wrong word.

Wouldn’t they have repossessed his home? Or is it different with lifetime mortgages?

Sure you're speaking generally there Gwenhwfar. I would rather my grandad had some stress free, happy final years than see a penny of his money.

Other people has mentioned LPA and I do have that for him (currently checking that all out as have never needed to use it before and was set up a long time ago). My father (his son) died a few years ago which is why this all falls to me.

At the risk of repeating what has already been suggested, I was distracted by some unnecessary "not nice" comments.
Do you have a formal Power of Attorney for his finance? If not I think you should get one.
You will need to have full details of the account and if there was any legal third party involved, perhaps giving advice.
You need to request contact with the company involved. Do you recognise the name? Are they a bank or linked to a brand that has a reputation.
I assume you have checked on the value of the property, have any nearby been sold recently, Rightmove has the details.

You should be able to rescue some value. All may not be lost.

I think this can happen in that even though it is explained at the outset of taking out equity release the focus is more on the present and being given some money.

Documents are presented that show the interest rate and what it can add up to, but like all terms and conditions sometimes they are not as "interesting" to fully read and digest. Though the reverse is true. They are the crucial part.

Also people can be a bit head in the sand over things in the distant future and just deal in the present. So the money is handed over. The money is then spent on various things like a nice new car, some day to day money topping up a pension etc.

And in all honesty the Grandfather has been very head in the sand when receiving financial statements and ignoring them / not reading them properly / putting them in a drawer etc.

Then he is confronted with the facts of actions which have come to pass, which were in the terms and conditions right at the outset which were agreed and signed. He may well have just skimmed over say £20k money release at 4% interest for life = £XX in 10 years, £XX in 15 years etc.

Now he is older, his memory not as it was before, his actions of 20 years ago not as clear etc. etc.

I know you don't need a reason, but I would question the motive of people doing this to get their hands on their inheritance

Thats why you need permission from the person or a POA.

That said, a SAR is just all the data they are processing or have processed about a person. That alone wont entitle you to anything. Eg If the company acted legally in granting the equity request then noone will get anything from it.

For the OP however, it might shed light on what amount was lent, and when, and the interest rate accrual etc

My late FIL did an equity release, it was quite a normal process 20 odd years ago I believe. I did a huge amount of boring research when we found out about it too.

The basic premis of them is that you don't repay it as you would a mortgage with a monthly amount. They are designed to tick away in the background and be settled by the estate upon the person's death or when the property is sold to fund care fees for example.

The issue being that as interest rates have risen and people live longer you often end up owing far more than was projected at the time it was done.

So ultimately your grandad hasn't done anything wrong. They were sold on the basis you took it out and forgot about it.

That said it is worth doing a SAR on it to find out the exact terms etc as he may have a claim for it being missold.

But far more important is to reassure him that he is absolutely not a failure and it has allowed him to live the life he has had and that is all that matters!

Hope he is ok