Prudential Lifetime Mortgages - help/info required about this please!

JayGer83

Hi!

Following the sudden death of my mother in March 23 we discovered she and my father had taken out one of the above to raise some cash. My father was confident that all was in order and that there was still more than enough value in the house to cover everything. Unfortunately we soon discovered this was not the case - a £25k loan some 17 years ago was now looking to return £155k+! My dad was horrified but the papers are in order so we can't say for sure whether they were naïve, not advised properly or whatever. Anyways, he decided to sell up and we found him a lovely flat to rent but before he even moved in he died suddenly in March 24. The Will left the house to myself and 2 sisters - both younger - my middle sister has since passed away with MND in September last year so there is just me and my youngest sister now dealing with things. Despite being in a lovely location and in walk-in condition the Home Report put a value of £175k and the house is marketed at that price. Since being for sale however, the market has fallen in our area and there has been little to no interest and our Agent is suggesting that lowering the price may be the only option. They died with no capital; just a funeral plan each (which didn't cover!) so there is literally nothing there (they assumed their home was enough value) and I am wondering if anyone has had any experience in dealing with a product like this? Even if we got £175k by the time the solicitor's fees and other bills have been settled there is not enough to cover what they now say they are due (we have had the 9 months break) approx £170k. I suppose my biggest concern is that my sister and I and our families are not liable; that this is not our debt, in fact my dad died devastated that he wasn't leaving us anything. 

I would appreciate hearing if anyone else has had to deal with such. I actually can't believe that they they did something like this but they are so well advertised I suppose it's easy to get sucked in....

thanks in advance

user1977

I think some of these products are capped at the value of the property, so are you sure there's a negative equity position here, rather than the lender just taking the net sale proceeds?

You don't "inherit" the debt, but you need to step carefully if the estate is actually insolvent.

I presume a Scottish estate given the mention of a Home Report?

MWT

Communication with the lender is vital if you think there will be a shortfall, as most of these contracts will include obligations to get their agreement for a sale that will not cover the amount outstanding.

So it is very important for the executors of the estate to ensure they have that approval before selling.

Can you confirm what the interest rate was for this product as it feels like it is higher than I would have expected for a product taken out in 2007/8, although there was a bit of a spike around then...

JayGer83

user1977 said:

I think some of these products are capped at the value of the property, so are you sure there's a negative equity position here, rather than the lender just taking the net sale proceeds?

You don't "inherit" the debt, but you need to step carefully if the estate is actually insolvent.

I presume a Scottish estate given the mention of a Home Report?

Hi - thank you for replying. Yes, we are in Scotland. Initially our lawyer confirmed that they would only receive any profit so that would tally with what you are saying. Just wanted to know if anyone else had experienced a situation like this but from conversations around this subject including friends who have since found out that parents have done similar - it would appear that we are perhaps only starting to see the ramifications of borrowing in such a way, ie those in their 50's and 60's who did this confidently in the last 20 or so years are now needing to sell or have sadly passed away and the full picture is becoming clear as to what they actually agreed to. 

JayGer83

MWT said:

Communication with the lender is vital if you think there will be a shortfall, as most of these contracts will include obligations to get their agreement for a sale that will not cover the amount outstanding.

So it is very important for the executors of the estate to ensure they have that approval before selling.

Can you confirm what the interest rate was for this product as it feels like it is higher than I would have expected for a product taken out in 2007/8, although there was a bit of a spike around then...

Hi - thank you for replying. My parents lawyer is also executor and he has been dealing directly with the lenders. He also has all the paperwork so I can't confirm what the interest rate agreed would have been but yes, things did go a bit wild in 2008 in the financial sector. I trust that he will advise and deal with accordingly, I suppose I was just looking to see if anyone had been thro a similar experience.

MWT

JayGer83 said:

... it would appear that we are perhaps only starting to see the ramifications of borrowing in such a way, ie those in their 50's and 60's who did this confidently in the last 20 or so years are now needing to sell or have sadly passed away and the full picture is becoming clear as to what they actually agreed to. 

To be fair, this has been a regulated market for the majority of the last 20 years and the exact implications of what people were agreeing to has been made abundantly clear to those taking out these products, but what has never been required is for those choosing to release equity in this way to inform their children or others who had expectations of inheritance that it was likely that there would be little left as a result of the rolled-up interest.

The result being that we do see a slow but steady stream of people like yourself, who find out what their parents decided to do only when dealing with their estates.

I would always recommend that those contemplating equity release talk to their family about it, but many find that to be a difficult conversation and decide not to do so.

Your situation is relatively unusual though, as for most of the last 15-20 years the interest rates have been low enough that house value increases have stayed ahead of the rolled-up interest in most parts of the country so 'negative equity' situations have not been common.