Living mortgage? Living nightmare!!

sleepless_nights_2

My Mum and Dad took out a living mortgage against their home in 2006. The loan was for £30,000 over 20 years. It has come to my attention that in 14 years time that £30,000 will have risen in interest to £120,000
I beleive that they were mis sold this. My Dad died just 12 weeks after signing the paperwork although we didn't know he was ill at the time.
My Mum is distraught at the thought of having no inheritance to leave to her grandchildren. We have written to the ombudsman but don't hold out much hope of help.
How can this be right that companies like Northern Rock can abuse old and vulnerable people like this??? What can we do to get out of this terrible situation??

smidgey

What makes you think this was missold? Did your father get a key facts illustration outlining the interest charges? Mine spells it out quite clear that for every £1 I borrow I will pay back £2.81. Sadly your father is an adult and unless you can prove he wasn't of mind I think you'll be stuck with it.

kingstreet

Presumably this is some kind of lifetime mortgage or equity release scheme.

First thing you need to do is establish who advised your parents about this product. Check through the paperwork they were given at the time.

Does the paperwork - normally a suitability letter - cover the reasons for the advice and how this product best suited their needs?

In the first instance, you need to make a complaint to the company which gave the advice, setting out why the product recommended was incorrect and how it failed to satisfy their needs. You give the advisory firm 8 weeks to reach a conclusion to the issue.

If they fail to reach a conclusion with which you are satisfied, you then have the right to escalate the complaint to the Financial Ombudsman Service (FOS) who will look at the advice documentation and product terms and will determine if the advice given was inappropriate.

In my experience, the home reversion scandal of the 1980s has made those working in this sensitive area much more careful in how they deal with such cases. I expect a very detailed record of the advice given.

sleepless_nights_2

smidgey wrote: »

What makes you think this was missold? Did your father get a key facts illustration outlining the interest charges? Mine spells it out quite clear that for every £1 I borrow I will pay back £2.81. Sadly your father is an adult and unless you can prove he wasn't of mind I think you'll be stuck with it.

After he died we were told he had been suffering a series of mni strokes in the months leading up to his death. I do not believe he was of sound mind and he was never asked to take part in a medical before being sold this

silvercar

sleepless_nights wrote: »

My Mum and Dad took out a living mortgage against their home in 2006. The loan was for £30,000 over 20 years. It has come to my attention that in 14 years time that £30,000 will have risen in interest to £120,000
I beleive that they were mis sold this. My Dad died just 12 weeks after signing the paperwork although we didn't know he was ill at the time.
My Mum is distraught at the thought of having no inheritance to leave to her grandchildren. We have written to the ombudsman but don't hold out much hope of help.
How can this be right that companies like Northern Rock can abuse old and vulnerable people like this??? What can we do to get out of this terrible situation??

2006!! I thought these things were restricted around 1986.

Good advice from Kingstreet on making a claim.

If the claim fails (and I haven't a clue whether it will or not) then you have time for remedial action.

Firstly you want to establish whether there is a clause that prevents the total amount owing being greater than the value of the property. Given the loan was given in 2006 I would expect there to be, but do check.

Second find out how much is owing now and what interest rate is being charged, I know no interest is being paid but there is a rate used to calculate the interest being rolled onto the loan. You also need an idea of the property's value.

So armed with these details you can see whether it is worthwhile borrowing elsewhere to clear this debt or whether it is best to let it roll on in the knowledge (though check this) that the amount owed can never be greater than the property value.

For example, if the loan is already near the property value you may as well let the loan continue and save elsewhere. If there is equity in the property and the loan is charged at a rate higher than you or your mother could get on a mortgage, you may want to think about paying off this loan with a new mortgage, knowing that in the long term you/ your mother/ children will be better off.

Bear in mind that, if your mother needed long term care, this home loan would mean that she couldn't be expected to hand her home over to pay for care, whereas she could be expected to sell a loan free home.

silvercar

sleepless_nights wrote: »

After he died we were told he had been suffering a series of mni strokes in the months leading up to his death. I do not believe he was of sound mind and he was never asked to take part in a medical before being sold this

Sorry for your loss.

Given that the living loan couldn't be redeemed until neither parent is alive, there isn't a direct impact that his illness had on the policy.

The "sound mind" issue is going to be difficult to prove, given that you weren't aware at the time that he was ill. You would need medical reports showing that he was under some sort of investigation/ sought medical advice/ at the time. Because retrospectively if he and his family were not aware he had a condition it is going to be impossible to prove that the loan seller acted in an incorrect way.

sleepless_nights_2

kingstreet wrote: »

Presumably this is some kind of lifetime mortgage or equity release scheme.

First thing you need to do is establish who advised your parents about this product. Check through the paperwork they were given at the time.

Does the paperwork - normally a suitability letter - cover the reasons for the advice and how this product best suited their needs?

In the first instance, you need to make a complaint to the company which gave the advice, setting out why the product recommended was incorrect and how it failed to satisfy their needs. You give the advisory firm 8 weeks to reach a conclusion to the issue.

If they fail to reach a conclusion with which you are satisfied, you then have the right to escalate the complaint to the Financial Ombudsman Service (FOS) who will look at the advice documentation and product terms and will determine if the advice given was inappropriate.

In my experience, the home reversion scandal of the 1980s has made those working in this sensitive area much more careful in how they deal with such cases. I expect a very detailed record of the advice given.

Thank you, We have done everything you suggested, we are waiting on a second reply from the ombudsman and looking into ways of capping the interest by taking out a mortgage to cover the costs.

sleepless_nights_2

silvercar wrote: »

Sorry for your loss.

Given that the living loan couldn't be redeemed until neither parent is alive, there isn't a direct impact that his illness had on the policy.

The "sound mind" issue is going to be difficult to prove, given that you weren't aware at the time that he was ill. You would need medical reports showing that he was under some sort of investigation/ sought medical advice/ at the time. Because retrospectively if he and his family were not aware he had a condition it is going to be impossible to prove that the loan seller acted in an incorrect way.

Thank you I see your point it just seems so unfair

kingstreet

sleepless_nights wrote: »

Thank you, We have done everything you suggested, we are waiting on a second reply from the ombudsman and looking into ways of capping the interest by taking out a mortgage to cover the costs.

So you've already complained about the advice and escalated to FOS?

What grounds did you use to complain?

Did the solicitor handling the transaction carry out or commission a test of capacity on your parents?

holly_hobby

Bit late to the party on this .. and most of its been raised, but could you clarify the following to enable as much of an evaluation here as possible ...

1. Is this a jnt mge ?

How was it effected - execution only or did they sit down with an adviser ?
What was the purpose of the eq release exercise ?

2. How old were your parent(s) when they effected it ?

3. Did you father have any visible or noted signs of cognative imparement noticeable to the advisor and/or immediate family inc your Mum .. i.e was his decision making process and ability to absorb and process info noticbly diminished ? If so, was this investigated by him & family prior to the purchase (notwithstanding the fact that you say you were unaware until post death of his historic mini strokes). Indeed mini strokes as you probably know can often leave no visible evidence or lasting damage following their visit, and even the individual may be unaware they have had one or several. Although if this was a jnt advised mge, of course BOTH of your parents would have to be deemed and noted as vunerable individuals at POS, for any chance of having the validity of contractual terms they entered into sucessfully challenged in court.

4. Have you seen the POS docs ? (supporting evidence of a defence using such literature should have been provided by the lender in their final response)

5. What was the basis of your Mums complaint to the lender ?

6. What was their response - what exactly did they defend the sale on ? i.e They should have provided a full explanation of the basis of their rejection, ideally with supporting documention illustrating their points, in their final response.

7. I'm unfamiliar with this product (will go and have a google), but it appears from my reading that it was an interest rolled arrangement (similar to lifetime arrangements), but with a defined 20 yr term mge .. thats unusual, so is this correct ?

If so how did they intend to repay at the 20 yr anniversary ?

If I have misunderstood please correct me, as my guess is that is was a true equity release lifetime mge arrangement, which has an open ended term, repayable on death (2nd death if a jnt arrangment), or entry into long term care.

If you can give some info re the above, it will make any evaluation of the situ much more accurate and relevant.

Hope to help

Holly

Thrugelmir

sleepless_nights wrote: »

My Mum is distraught at the thought of having no inheritance to leave to her grandchildren.

Perhaps your father thought differently.

What was the money released used for?

Given that he knew he was unwell.