Genuinely shocked’ – Family see inheritance eroded due to deal with ‘poor value for money’

Rip Off Britain highlights issues surrounding equity release loans

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Before Robert’s father John passed away, he wanted to start some home renovations on his dated house, to make it more modern and liveable for his children in the future.Robert thought he wanted to do this as a way to “provide when he was no longer here”.

However, it wasn’t until Robert looked through John’s finances, that he discovered the “eye-watering” amount of interest that was being accumulated each year.

The original £15,000 loan had grown to £60,000 and is still growing.

On the BBC show Rip-Off Britain last month, Robert explained how his father could have ended up in this situation.

To pay for the work being done, John raised £15,000 by borrowing against the value of his home with an equity release loan.

Robert explained John had no income, so believed this equity release loan was the only way he could get money and ensure his parents wouldn’t have to make any more repayments whilst they were alive. Instead, the loan and interest would only be paid after his parents’ deaths.

Th equity release deal was signed in 2001, but it wasn’t until 2017 that Robert realised the deal wasn’t what it seemed.

John asked Robert to look over his finances to ensure his wife would be okay when he passed and that’s how Robert knew something was wrong.

He said: “When I showed him how much it was growing, he was genuinely shocked.

“Not for one second do I think he would have done it if he knew how it was growing.”

When looking through the documents from the financial advisor helping his dad out, he saw a letter from the expert saying the equity release deal was “poor value for money”, but still went on to recommend it.

The contract drawn up for the deal did state how much John could end up paying, and that eventually he could lose all equity in the house after many years.

After John passed away in 2018, Robert contacted the lender trying to pay this loan off, however the exit fee alone was between £12,000 to £13,000.

Robert continued: “We won’t be able to pay anything until my mum passes on.

“They won’t even consider allowing you to try and make some payments to stop it getting any worse or even to pay it off.”

In 2018, Robert took his case to the Financial Ombudsmen Service because he believed the policy was misleading, but they didn’t agree with him.

As time goes on, the share of the house going to the equity release company is just getting bigger and bigger.

Robert added: “I hope my mum lives for another 10 years at least.

“I suppose we’re looking at another £30,000 or £40,000 coming off the equity of the house.”

Equity release became regulated by the Financial Conduct Authority in 2004 which created an official complaints procedure and access to compensations for those who feel wronged.

Despite the regulation, Martin James from Complaints Service Resolver said: “If you’re thinking about taking an equity release loan out, make sure you fully understand exactly what it involves.

“Just because there’s regulation about a product, doesn’t make it any good.”

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