Equity Release Early Redemption Nightmare

susanmarie

Jonbearwood, I hope you get it resolved, what a dreadful situation for your parents. Why is it some IFA's don't really seem to work in their clients best interested at all. I am trying to sort out a similar issue for my mother (not equity release, but an extortionate secured loan agreement) try www.ascotequityrelease.co.uk

ancient_geek

We took out an equity release with Aviva 4 years ago for 31K and signed all the papers that said we understood what we were doing. We needed to downsize to pay off some short term debts and finally sold our flat last september. To our amazment we had to pay £6500 early repayment charge. This was calculated on the performance of a 30 year gilt. We understood the risk at the time, but we did not dream that the economy would dive so dramatically. On the date of completion, gilts were at their lowest for a generation. Even my solicitor was astounded.
The total repayment on the 31K loan over 3-1/2 years was 47K.

I checked the FSA website and they state that although ERC's were legal they should be fair and reasonable, so on this basis I made a claim to Aviva who turned it down of course so that I could make an official complaint to the Ombudsman. They told me that there was a backlog of complaints (not surprising) and that they would nominate an adjudicator in 12 weeks.
In the meantime I mentioned my case to my local MP who was also amazed at the amount and wrote a letter to the ombudsman to sort my case out. Very soon an adjudicator contacted me and collected some data.
Last week he wrote to me and stated that he could not recommend a partial refund as he thought that the amount was fair and reasonable, so my case will now go to the ombudsman who will make a final decision.
I feel quite despondent. Many people say that as the FSA is financed by the very institutions that fund it, they can not be impartial and tend to rule in favour of the banks and insurance companies. Would somebody tell me this is not true.
The Liverpool Victoria and some others who also offer Equity Release Mortgages set the ERC to 5% for the first 5 years and 3% there after specifically to avoid the uncertainty at the time of signing the mortgage. Now that is fair and reasonable, so if anybody is thinking of taking out an Equity release scheme give Aviva a miss.

Thrugelmir

susanmarie wrote: »

Why is it some IFA's don't really seem to work in their clients best interested at all.

Pure assumption. Some older people wish to enjoy the fruits of their hard labour. Not see it passed onto an undeserving generation.

dunstonh

Why is it some IFA's don't really seem to work in their clients best interested at all.

They do. However, you can not legislate for those that go DIY and dont read about what they are buying and then expect to get the same levels of protection as they would have got on advised cases.

Many people say that as the FSA is financed by the very institutions that fund it, they can not be impartial and tend to rule in favour of the banks and insurance companies. Would somebody tell me this is not true.

The FSA is independent of financial companies. It and Govt decide it's funding and than makes the industry pay for it via a levy. Industry has no ability to decide the level of funding or where or how it is spent.

Now that is fair and reasonable, so if anybody is thinking of taking out an Equity release scheme give Aviva a miss.

If you had put a good enough case to the FOS about what was fair and unfair on how they fund their product then then the FOS would likely agree with you. Maybe LV fund their product by different means. It does not mean their lower apparent charge is any fairer. For all you know their lower charge could be because they have charged it elsewhere or they could even be making more profit out of it despite it being lower and pro-rata it could be more unfair.

We understood the risk at the time, but we did not dream that the economy would dive so dramatically.

Which works enormously against you in any complaint. You cannot say you knew and understood the risks and when one of the risks you knew about happens then say it is wrong. Risks are risks because they could happen. If they couldnt happen they wouldnt be risks.

megnbairns

re equity release early payment nightmare. LV mortgage company agreement states 'You may only choose to repay part of the amount owed early if the amount repaid is at least £5,000'. What is not clear from this is that each individual payment must be £5,000 or more. This makes it nigh impossible to make any repayments against the debt.

megnbairns

ancient_geek wrote: »

We took out an equity release with Aviva 4 years ago for 31K and signed all the papers that said we understood what we were doing. We needed to downsize to pay off some short term debts and finally sold our flat last september. To our amazment we had to pay £6500 early repayment charge. This was calculated on the performance of a 30 year gilt. We understood the risk at the time, but we did not dream that the economy would dive so dramatically. On the date of completion, gilts were at their lowest for a generation. Even my solicitor was astounded.
The total repayment on the 31K loan over 3-1/2 years was 47K.

I checked the FSA website and they state that although ERC's were legal they should be fair and reasonable, so on this basis I made a claim to Aviva who turned it down of course so that I could make an official complaint to the Ombudsman. They told me that there was a backlog of complaints (not surprising) and that they would nominate an adjudicator in 12 weeks.
In the meantime I mentioned my case to my local MP who was also amazed at the amount and wrote a letter to the ombudsman to sort my case out. Very soon an adjudicator contacted me and collected some data.
Last week he wrote to me and stated that he could not recommend a partial refund as he thought that the amount was fair and reasonable, so my case will now go to the ombudsman who will make a final decision.
I feel quite despondent. Many people say that as the FSA is financed by the very institutions that fund it, they can not be impartial and tend to rule in favour of the banks and insurance companies. Would somebody tell me this is not true.
The Liverpool Victoria and some others who also offer Equity Release Mortgages set the ERC to 5% for the first 5 years and 3% there after specifically to avoid the uncertainty at the time of signing the mortgage. Now that is fair and reasonable, so if anybody is thinking of taking out an Equity release scheme give Aviva a miss.

Yes, the 5 and 3percent on ERC is clear, but LV will not accept individual payments of less than £5,000.

moshimum

My parents took out an equity release in 2003 for £50k, they have never spent the money and now have some interest accrued however not even close to the early redemption figure AVIVA have quoted of £105,573, quoted 11/11. They have been to the FOS and had their claim declined. My parents had a good life before this loan, a nice holiday each year and no real money worries. AVIVA quote in their literature "we will tell you if the products not right for you" I am going through their case however it seems they don't have a leg to stand on. AVIVA have covered every base. Ever since taking out this loan they have been too afraid to touch the money and have stopped the holidays etc as they are too afraid to spend any money. My parents only recently came to me with there worries as they are desperately trying to sell their house to get out of this loan. My mother is now sick with worry and ashamed she has got into this mess, they need to down size as the home they have is too much for them now but need enough to get a smaller place, this is proving hard with the way the market is at the moment, and they can't drop their price too much as they need to pay off AVIVA. This product does seem to rob hard working people of their money far too easily, anyone have any ideas?

dunstonh

I am going through their case however it seems they don't have a leg to stand on. AVIVA have covered every base.

I know you see that as a negative right now but it is actually a positive. It means no wrong doing has taken place and that should be the right thing.

This product does seem to rob hard working people of their money far too easily

The product is effectively you a mortgage you do not repay. The interest is added to the debt. They have had it nine years. If you know from your mortgage, all you pay in the first 10 years is typically interest and very little capital. Imagine if you made no payments and all those interest amounts were added to the debt. That is what is happening here.

This is how borrowing money works.

Typically, people doing equity release are recommended to use an IFA and a solicitor to give them advice and go through the pros and cons. IFAs generally class it as an option of last resort. However, if you go direct to provider and buy the product, they dont have the same criteria to go through.

Unfortunate but if the FOS have found no wrong doing then it would indicate there is no wrong doing.