Life time mortgage i believe mis-sold to my father in law

j_Millward-Croft

We have recently found out that my in laws took out a life time mortgage of £150,000 approx 10 yrs ago.  Even though they owned there own property and business properties.  My father in law died of a heart attack but also had severe dementia. The current interest is £3000 per month and the total is over £600,000.  My mother in law who has now moved to a carehome also with dementia.  I have all the paperwork but need advice of how to start a complaint for this as we believe it was mis sold to them.

itsthelittlethings

That seems excessive.

Keep_pedalling

Having all your assets tied up in property can make you cash poor so it is not a reason why someone should not take out equity release in some form.

Are you sure about those numbers? £3000pm on £600k is 6% which suggest the original loan was far higher than £150k. It would take an interest rate of 15% pa for the debt to grow 4 times in 10 years. Even if they are on a varying rate the BoE base rate was much lower back in 2015 than it is today so that would not account for such a growth. 

MWT

j_Millward-Croft said:

We have recently found out that my in laws took out a life time mortgage of £150,000 approx 10 yrs ago.  Even though they owned there own property and business properties.  My father in law died of a heart attack but also had severe dementia. The current interest is £3000 per month and the total is over £600,000.  My mother in law who has now moved to a carehome also with dementia.  I have all the paperwork but need advice of how to start a complaint for this as we believe it was mis sold to them.

Something feels wrong with those numbers, £600,000 and £36,000 a year interest suggests around 6% which would not be significantly high for this type of product at that time, but you can't get to £600,000 when you start at £150,000 over that period at that rate...

Are you sure it wasn't a larger facility with an initial drawdown of £150,000 and then a further £150,000 soon after?

Back to your main point, you have not explained why you think it was mis-sold?

What did they spend the money on for example?

Just because they had their own property doesn't mean that they didn't use the cash to pay off a mortgage or a business loan for example.

We very often see posts like your because parents are often not good at telling their children about their money problems and the choices they make to deal with them, but that doesn't mean they were mis-sold, just that they didn't want to tell you about it at the time.

Similarly having a dementia diagnosis at some point doesn't mean they were not able to make the decision to take this type of product at the time they took the money.

They will have had to take advice before getting this type of product so it is not a simple thing to be mis-sold...

MyRealNameToo

j_Millward-Croft said:

We have recently found out that my in laws took out a life time mortgage of £150,000 approx 10 yrs ago.  Even though they owned there own property and business properties.  My father in law died of a heart attack but also had severe dementia. The current interest is £3000 per month and the total is over £600,000.  My mother in law who has now moved to a carehome also with dementia.  I have all the paperwork but need advice of how to start a complaint for this as we believe it was mis sold to them.

What's your evidence it was missold? 

Not liking the outcome doesnt mean it was missold, the issue with lifetime mortgages is the compounding of interest with nothing being paid towards either the interest or capital but thats how they are intended to function so those that are asset rich but cash poor can get some value from their assets without having to sell them and push the problem down to when either you die or have to move into permentent care. 

There is unfortunately a big disconnect between elderly people who see them as a good lifeline and their kids who see their inheritance diminished but didnt put their hand in their own pocket to assist their parents with cash when they needed it. 

MWT

MyRealNameToo said:

There is unfortunately a big disconnect between elderly people who see them as a good lifeline and their kids who see their inheritance diminished but didnt put their hand in their own pocket to assist their parents with cash when they needed it. 

To be fair, in cases like this most parents are not going to even tell their 'kids' they need the cash, so the 'kids' can feel that they were deprived of the opportunity to help because they were never asked.

The surprise often occurs when care fees come into the picture and that is a really bad time to find the home has to be sold relatively quickly and that a significant chunk of the cash they were hoping to release is going to vanish, hence these posts...

kingstreet

Establish the source of the advice and obtain the sales records. You're likely to find this was very well documented with both advisor and solicitor visits. Relatives are usually included in the advice process unless the borrowers specifically refuse such involvement.

MWT

kingstreet said:

...Relatives are usually included in the advice process unless the borrowers specifically refuse such involvement.

In my, relatively recent, experience it is recommended, but does not form a normal part of the process which has to be refused. That may of course vary between advisors, and is I presume driven by a desire to avoid the 'mis-selling' claims.

10 years or more ago I doubt it would even have come up as more than just a suggestion... 

kingstreet

TBH I'm not sure about ten years ago, but wasn't the ERC around then?

From the current AIR FF;-

Involvement

Has the customer been advised to speak to their family and any other material beneficiaries of

their Will, and to consult an independent legal adviser?

Yes

Does the applicant want to involve anyone in these discussions?

No

MWT

kingstreet said:

TBH I'm not sure about ten years ago, but wasn't the ERC around then?

From the current AIR FF;-

Involvement

Has the customer been advised to speak to their family and any other material beneficiaries of

their Will, and to consult an independent legal adviser?

Yes

Does the applicant want to involve anyone in these discussions?

No

That is more in line with the process than your first comment made it sound.

There is no pressure or expectation from the advisor that relatives will be spoken to, simply advice that it is a good idea and they are available if required, rather than 'relatives are usually included...'

It remains a difficult point to put pressure on even though it is a good idea as like all financial decisions there is a necessary amount of confidentiality around the details yet this is one area where it would be a good idea to 'tell the kids', but most really will not want to do that.  

kingstreet

MWT said:

kingstreet said:

TBH I'm not sure about ten years ago, but wasn't the ERC around then?

From the current AIR FF;-

Involvement

Has the customer been advised to speak to their family and any other material beneficiaries of

their Will, and to consult an independent legal adviser?

Yes

Does the applicant want to involve anyone in these discussions?

No

That is more in line with the process than your first comment made it sound.

There is no pressure or expectation from the advisor that relatives will be spoken to, simply advice that it is a good idea and they are available if required, rather than 'relatives are usually included...'

It remains a difficult point to put pressure on even though it is a good idea as like all financial decisions there is a necessary amount of confidentiality around the details yet this is one area where it would be a good idea to 'tell the kids', but most really will not want to do that.  

It sounds like our process is a bit different to others, so apologies for the poor word selection. We would expect inclusion and document exclusion in the suitability report where that has been chosen.