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Help with "Lifetime Mortgage" please

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Help with "Lifetime Mortgage" please Empty Help with "Lifetime Mortgage" please

Post by Corazon on Thu Aug 08, 2019 10:35 am

Hi everyone, as an old follower of GOODF its great to see this forum alive and kicking! I really need some help on behalf of my mother who took out an equity release scheme (called a "lifetime mortgage by the creditors) 15 or so years ago. The interest rates are now running at a very high cost which will come out of the sale of the house when she passes on. If she lives to 100 we will actually owe them money! I've use the 3 letter process with success for credit cards in the past but would now really like to know if the same process applies to this type of loan (or mortgage if it is a mortgage) and if anyone has had any experience/ success with this type of situation. The alleged debt is pre 2007 and the company has now changed hands to a new owner, I'm assuming without new contracts being put in place although I'm not entirely sure. I'm just starting out with this and am preparing the first letter, any advice would be very gratefully received

Many thanks!

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Post by daveiron on Thu Aug 08, 2019 12:03 pm

Hi & welcome.

I have not come across this problem before, others may have good advice .

All I would say at this point is do NOT send them anything at this stage, and most certainly do not stop making the payments. This requires further research before doing anything else.
It may be they are in breach of FSA rules regarding the interest rates.
It seems clear that their objective is to own everything by the end leaving no other equity.
Stopping payments will play right into their hands as they would evict at the drop of a hat.
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Post by Corazon on Thu Aug 08, 2019 2:58 pm

Hi daveiron, thanks for your reply, really appreciated. As I understand it the moment there are no ongoing repayments being made, they take the money (or the house) when my mum sells it or passes on, I'm not sure if its a mortgage or a loan tbh but I think they basically take ownership of the property. I believe the original equity release / loan / mortgage was around 30k but with compound interest the amount due is over 100k already so naturally we are very concerned. I hope to be able to do something about it so any further advice from you or other members here will be immensely valuable! Thanks again

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Post by flyingfish on Thu Aug 08, 2019 4:59 pm

I think you need to check out the exact deal that she is on.  In most cases deals of this sort are a mortgage, meaning your mother remains owner of the house.  The bank makes a loan then instead of the borrower paying interest it is added to the principle throughout the term.  The bank has a charge on the property securing their balance.  Reputable (using the term loosely) providers normally include a "no negative equity" guarantee meaning they can never claim more than the value of the house.

Depending on the small print, if their interest rates are extortionate then maybe one option might be to look for a better deal which would allow you (your mother) to pay off this loan and continue on a fairer basis. What's the current interest rate? Going from 30K to 100K in 15 years would be something like 8% overall, but of course rates in general were higher 15 years ago.

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Post by Corazon on Thu Aug 08, 2019 6:15 pm

Thank you for your reply Flyingfish, much appreciated. I have just found out that it is a "lifetime mortgage" through equity release since 2003 and the interest is 7.3% Current charges are over £7000 PA Do you think this is challengeable in the way that credit cards are? I'm presuming it still works on proof of claim so if they can't provide the contract or if the contract doesn't meet the FSA requirements pre 2007 (assuming they are the same for mortgages as they are for credit cards) then there is probably no case to answer? I'm really trying ascertain if there is a difference between credit cards (which I have experience of) and these types of mortgage and the potential dangers if there are any differences. Also the company has changed, is it true that legally there should be a three party contract between my mother, the old creditor and the new one (is it a deed of novation) for the transfer of the alleged debt? And also proof of accounting, ie whether the loan was actually originally transferred from their account to my mother's as they led her to believe. Apologies for all the questions, I want to be sure I have a fighting chance before entering the arena. Any info gratefully received Smile



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Post by flyingfish on Fri Aug 09, 2019 8:24 am

You need to go very carefully, and I'd suggest going though all the documents first.  If you don't have them then ask the lender, using a SAR if necessary.  Remember the requests will probably have to come from your mother unless you have POA.

The situation is very different from a credit card. It won't come under the Comsumer Credit Act, but I can't see why it wouldn't fall under the same regulation as any other mortgage contract.  Where it really differs is that the bank is in a very very strong position.  You can't withhold payment as none are due to be made anyway, and the bank's ability to recover the balance when it falls due will (probably) be secured by a charge over the property.  Effectively everything is in place for them to get their money back.

Once you have the paperwork I suggest a few checks.  (1) Is there any specific provision if it goes into negative equity (2) What are the cancellation terms (3) under what circumstances can the bank force sale of the property (4) what if any terms are included regarding interest rate and interest rate changes?

7.3% looks a high rate, but I think these products generally have higher rates than mass-market "normal" mortgages.  Maybe another bit of research would be to get a quote from someone relatively reputable (say Aviva) to see what terms would apply for a deal that would pay off the £100K balance.

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Post by Corazon on Sat Aug 10, 2019 11:29 am

Thanks Flyingfish, info like this is invaluable and almost impossible to find anywhere else, I do have POA over my mother so will make a request for the contracts and see where that takes us. Thanks again

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