Equity Release lifetime mortgage confusion

mell242

My mother took out a Lifetime Mortgage Equity Release plan through Aviva when she was 56, she is now 63. She 'released' £40,000 and her home is now worth about £270,000.

At the time I wasn't on good terms with her so my brother helped her out with all this. I am still not able to talk to her about this but she does mention our inheritance from time to time. From what I understand we will not have anything due to the interest etc. (what I believe to have been 6.5%.

I've tried to look online but it's hard to find out exactly what you are left with after signing these plans.
Any ideas/figures?
Many thanks

dunstonh

Aviva offer a selection of these. Each with different T&C. She should ask Aviva for the terms. Or she can ask the IFA that facilitated and provided the advice (Assuming she didnt go direct to Aviva - which is typically not the best way).

GeriChristie

Hi

in the pack your mother received will be a statement that shows the amount year on year, and the new amount due having compounded the interest. The early years are bad enough (my partner's parents took £21000 from their property (worth £120000) 5 years ago at 7.odd percent - we have been told the resettlement figure now is £38k, if they live another 17 years it will be £95k and growing - needless to say the house will be completely owned shortly after that by Aviva.

Worse, they were told they must pay for the property's freehold too - clearly so the company didnt have to pay for it when they pass over. This was £4000 of the small sum they released - so in a nutshell they used the residual money to improve the home they were to lose to Aviva - win win Aviva!

They did not understand any of the implications and had no family relative present or involved in negotiations/application. I believe the financial advisor was independed. I have no idea whether there was any other safeguard (SHIA) in place for them - either way they thought Aviva simply owned about 18% of their property - including any increase in value at the point they die and had no idea how the debt escalated so quickly. The money has gone, we have no means of paying this lifetime mortgage off and they are terribly upset at having nothing to leave the family.

dunstonh

They did not understand any of the implications and had no family relative present or involved in negotiations/application.

So, did they not seek legal advice?

I believe the financial advisor was independed.

So, thats a good sign and that should mean its ok. They get the consumer protection that offers (compared to very little when going direct).

The money has gone, we have no means of paying this lifetime mortgage off and they are terribly upset at having nothing to leave the family.

Modern equity release plans (which would include those of 5 years ago) are fine. They are the option of last resort. However, product disclosure is very good and fairly easy to understand. It is recommended that people seek legal advice and involve children in the transaction but that is optional.

needless to say the house will be completely owned shortly after that by Aviva.

That is highly unlikely as you dont appear to be including house price inflation in there.

they are terribly upset at having nothing to leave the family.

So, they would prefer to go without themselves instead?