Parents Equity release

lanerose60

My Mother lost her partner 3 years ago, they took out a fixed rate lifetime mortgage with Aviva in 2005, we have discovered that her £30000 equity release has now got a balance of £91000 and is increasing at the rate of 6% a year. This is unbelievable and a scandal in my opinion, she says she had no idea it would be this bad when she took it out. Are there any grounds for mis selling as this is outrageous. Bit stumped as to how to deal with this?

kingstreet

You need the sales documents from whomever provided the advice, Aviva or an intermediary. I'd be very surprised if the implications of interest roll-up weren't spelled out precisely.

Ayr_Rage

Interest rates were around 4.5% in 2005 so a lifetime mortgage at 6% doesn't seem excessive.

It doesn't sound scandalous or outrageous, just that those taking out the loan did not understand the long term implications of such a product.

The way to deal with it is to read the product documentation as advised by @kingstreet and see what options there may be.

DullGreyGuy

lanerose60 said:

My Mother lost her partner 3 years ago, they took out a fixed rate lifetime mortgage with Aviva in 2005, we have discovered that her £30,000 equity release has now got a balance of £91,000 and is increasing at the rate of 6% a year. This is unbelievable and a scandal in my opinion, she says she had no idea it would be this bad when she took it out. Are there any grounds for mis selling as this is outrageous. Bit stumped as to how to deal with this?

What did they think the compound impact of 6% interest would be? 

2005	30,000
2006	31,800
2007	33,708
2008	35,730
2009	37,874
2010	40,147
2011	42,556
2012	45,109
2013	47,815
2014	50,684
2015	53,725
2016	56,949
2017	60,366
2018	63,988
2019	67,827
2020	71,897
2021	76,211
2022	80,783
2023	85,630
2024	90,768
2025	96,214
2026	101,987
2027	108,106
2028	114,592
2029	121,468
2030	128,756
2031	136,481
2032	144,670
2033	153,351
2034	162,552
2035	172,305

This is what happens to a debt when you dont pay anything back on it. 

What is the property worth? 
Certainly worth checking what happens if/when the loan exceeds the property value. In modern policies they tend to be capped at the valuation at the point of termination so the estate won't be left with negative equity. 

lanerose60

She cant find original documents as her partner dealt with it all, she seems to think there is a maximum of £125000 to pay bach which seems unlikely to me

Peter999_2

Unfortunately, my parents in law took out an equity release in 2000.    No matter how I explained it to them they didn't care - they just wanted the money.      They took out £20,000 in 2000.    I expained everything to them in why it was such a bad idea.    What happens if one of them die, what happens if they want to move somewhere.

Part of the way through I found that they could transfer to a cheaper equity release which would save them a fortune.  They never filled in the form.

My father in law died in 2022.   My mother in law hated being by herself and wanted to move to be near us.      The bugalow sold for £300,000 and she only got £160,000.    As you can imagine, she couldn't buy anywhere for that sort of money and ended up moving in with my brother/sister in law.   They bought a new house (they didn't even tell us until they'd bought it).     My mother in law paid for £160,000 of it and I knew they'd treat her like a slave.    Despite me explaining why it was a good idea, she would register any interest in the house at all - I explained that they could kick her out at any time.

Now, less than a year later, they have fallen out and she has had to move in with my now ex-wife.   She doesn't have a penny to her name but was as miserable as sin living with my (now ex) brother in law and family.     My ex-wife now has to pay for everything for her (she doesn't appreciate my ex-wife at all and treats her worse than my brother in law treated her).

You just can't help people sometimes, but she can never say that she wasn't warned but just didn't care and wanted to go on very expensive holidays.      It's certainly not a scandal in my eyes.

whizzywoo

We are in the process of taking out a Lifetime Mortgage and the interest rate is 6.61%.

We have the option to pay the interest each month so that the debt never increases.

We can also pay amounts off the capital up to 10% of the amount outstanding without any penalties.

If we choose to we can stop paying the interest at any time but it would increase to 6.91%.

We can certainly afford to pay the interest and will pay an additional amount of the capital each month as well.

There will never be any negative equity and we still own the whole house but there is a mortgage charge on it.

It was very well explained to us and we are in no doubt what will happen if we don't make any payments towards it.

For us it means we can buy a new home that suits our needs and we will have much lower heating bills in a much warmer house.  We can well afford to pay the interest and a little bit more besides.

I don't think that you will find there is a case for mis-selling.

Hoenir

lanerose60 said:

My Mother lost her partner 3 years ago, they took out a fixed rate lifetime mortgage with Aviva in 2005, we have discovered that her £30000 equity release has now got a balance of £91000 and is increasing at the rate of 6% a year. This is unbelievable and a scandal in my opinion, she says she had no idea it would be this bad when she took it out. Are there any grounds for mis selling as this is outrageous. Bit stumped as to how to deal with this?

People can chose what to do with their own money. Why not enjoy life while you can. As long as they a roof over their heads. Nothing to worry about. 

kingstreet

lanerose60 said:

She cant find original documents as her partner dealt with it all, she seems to think there is a maximum of £125000 to pay bach which seems unlikely to me

Get in touch with Aviva who will tell her who gave the advice, them or a third party. Then, the next step is a SAR of Aviva, or the third party advisor to obtain the sales records - specifically, factfind, illustration and suitability report. The solicitor who handled the remortgage is also likely to have documents related to the advice process.

MWT

lanerose60 said:

My Mother lost her partner 3 years ago, they took out a fixed rate lifetime mortgage with Aviva in 2005, we have discovered that her £30000 equity release has now got a balance of £91000 and is increasing at the rate of 6% a year. This is unbelievable and a scandal in my opinion, she says she had no idea it would be this bad when she took it out. Are there any grounds for mis selling as this is outrageous. Bit stumped as to how to deal with this?

Nothing here that is unbelievable, a scandal, or outrageous, just exactly what would have been explained at the time, happening over a 20 year period...

For whatever reason, they decided they needed the money 20 years ago, and got it without any obligation to repay while they were alive and not in long-term care. 

The sad part of these arrangements is that so often parents do not feel they can tell their children that they need/want the money at the time and it requires a degree of honesty and trust that is not always present to tell their children what they plan to do.

The result is that the children end up here, outraged and upset, assuming that their parents have some how been mis-sold or fooled into taking these products, when the truth is that there was often no other way to get the money they desired at the time.

Even when the parents are still alive it is very hard for them to tell their children that they did this in full knowledge of what it would mean in the future, and it is easier to deny it than admit, or they genuinely have forgotten even though they will have been receiving annual statements detailing the progress of their loan.

Sorry if this feels harsh, but you are not the first to come here angry about this sort of product, and I'm sure you will not be the last...    

MWT

kingstreet said:

lanerose60 said:

She cant find original documents as her partner dealt with it all, she seems to think there is a maximum of £125000 to pay bach which seems unlikely to me

Get in touch with Aviva who will tell her who gave the advice, them or a third party. Then, the next step is a SAR of Aviva, or the third party advisor to obtain the sales records - specifically, factfind, illustration and suitability report. The solicitor who handled the remortgage is also likely to have documents related to the advice process.

All great advice to get the reassurance that all was done correctly, as is likely to be the case.