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common complaints and case studies

Kevin

 

why is there so much to pay back?

We hear from relatives of people who’ve released equity – concerned about the amount of money that needs to be paid back. The equity release may come as a shock to relatives. And where someone’s died, it may mean there’s less money than expected to pass on.

  • Equity release means people can take advantage of the value of their home – but it’s an expensive form of borrowing. The interest rates are generally higher than other types of loan. And because people don’t repay interest as they go, it’s added to the loan – and in turn has interest added to it – over a period of years.
  • To decide whether equity release was suitable for someone, we’ll ask questions about their personal and financial circumstances at the time they signed up to it. For example, could they have got the money they wanted in a less expensive way? Did they need something more flexible?
  • We’ll also check that the arrangement was clearly explained. In most cases, we find that it was. If it wasn’t, we’ll decide whether someone would still have released equity if they’d known more about it.

case study 1

Mrs L, a widow in her mid-fifties, wanted to move house – and was faced with a cost of thousands of pounds to end her lifetime mortgage early. Unhappy, she complained that she shouldn’t have been sold the lifetime mortgage.

We looked into the advice the equity release company had given Mrs L. It didn’t seem they’d considered other options, like a standard mortgage. Given Mrs L’s good financial position – and the low “loan to value” she wanted – we didn’t think equity release was suitable.

We told the equity release company to put Mrs L in the position she’d be in if she’d been sold a standard fixed-rate mortgage.

Julie

 

my relative was vulnerable – they were talked into equity release

Some people tell us their relatives were vulnerable – and so shouldn’t have been signed up to equity release. Relatives sometimes feel they should have been told what was happening.

  • Since April 2014, equity release has to be sold as part of an advised process. We’ll check that the equity release provider followed the rules and guidelines that applied at the time – and gave their customer a suitable recommendation about their options. 
  • The Equity Release Council requires its members to advise people to speak to their family and beneficiaries about what they’re planning. But even if people choose not to do this, there are safeguards in place to help make sure people don’t release equity if it isn’t right for them.
  • For example, the Equity Release Council’s rules say people must get independent legal advice – so a solicitor can explain the risks involved, confirm someone has the mental capacity to sign the contact, and also confirm they haven’t been unfairly influenced. We’ll check whether this happened.
  • If relatives say someone was vulnerable, we’ll look into why this might be. For example, were there issues with their mental capacity? Or did they make the decision to release equity at a distressing time?
  • Overall, we find most people receive suitable advice about releasing equity. We can give reassurance that someone wasn’t taken advantage of. But we know the situation can still be extremely upsetting – especially if someone’s not able to explain their decisions.

case study 2

Mrs T told us that her father, Mr N, was vulnerable when he was sold a lifetime mortgage. She said he hadn’t understood how the interest would add up – and that a family member should have been there during the meeting with the adviser.

We saw that Mr N had taken independent legal advice. The solicitor had confirmed that she’d explained the arrangement to Mr N. And the way the mortgage worked was clearly illustrated in the paperwork Mr N had been given.

We thought it was likely that Mr N has understood what he was signing up to. We appreciated that Ms T was upset – but we explained that the equity release company hadn’t done anything wrong.

Kevin

 

the early repayment charge isn’t fair

If people want to end their equity release arrangement early, they’re likely to face an early repayment charge. Equity release providers generally say this is to cover the cost of the interest they won’t get in the future, which they’d factored into their decision to lend.

Some people tell us they always planned to move – and shouldn’t have been told to release equity at all. We’re also asked to settle disputes about whether people meet the criteria for going into care – and whether the early repayment charge should apply.

  • We’ll look into whether someone received suitable advice based on their individual circumstances and future plans. If it’s clear that someone always planned to move – or needed flexibility – we’re unlikely to agree that equity release was a good option. 
  • If it’s clear that someone always planned to move – or needed flexibility – we’re unlikely to agree that equity release was a good option.
  • Couples who’ve released equity together don’t always realise that the early repayment charge will apply unless they both die or go into care. We usually find that this was clearly explained when the equity release was arranged. If it was, we’re unlikely to decide the charge is unfair.
  • When someone needs to move into care, the early repayment charge won’t apply if they meet certain criteria. If there’s a dispute over whether they meet the criteria, we’ll weigh up the evidence – for example, from GPs or care services – about how they’re able to manage daily life.
  • If we decide that the early repayment charge is unfair, we’ll tell the equity release provider not to apply it.

case study 3

Mr and Mrs L wanted to move into care. But their equity release company argued that Mr L didn’t need mobility assistance. This meant he didn’t meet their criteria for care – so the early repayment charge should apply.

We looked at reports from Mr L’s GP and occupational therapist. In our view, there was strong evidence that he was very infirm, and couldn’t move from room to room in his home.

That meant he met the equity release company’s criteria. So we told them that the charge shouldn’t apply.

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