Consumer rights: 'Are my mum and dad being scammed out of their home?'
A worried daughter should consider interfering to ensure her elderly parents understand equity release and dealing with payday lenders
Sunday 29 July 2012
Q: My parents have been trying to sell their house for a while now and they've had one very good offer. But almost as soon as it was made they seemed to regret the decision to sell. I suspect they really don't want to move as they've been in their home for 40 years and love the area and the neighbours.
However, they're also getting very worried that their savings are dwindling and their pensions aren't enough to live on.
Someone has been trying to persuade them to go for a scheme that allows them to borrow some of the value of their home but go on living there. I haven't met this person, don't know anything about them and am worried that my parents are being pressurised into something dodgy.
If they did go for this kind of scheme it seems to me they would be, in effect, taking on a mortgage in their seventies. I don't want to interfere but I'm worried they could end up losing their home.
A: It always worries me if older people feel they are being pressurised into making decisions. If I were you I'd interfere and insist on going along to any future meetings between your parents and the person they've been talking to. It could all be above board and you may find that they've been talking to a financial adviser about an equity release scheme. Even then, though, they shouldn't feel under pressure to make decisions.
Equity release schemes have had a bad press because they used to be inflexible and poor value with the real chance that people could lose their homes. But, there is a new generation of equity release products from responsible lenders available, so your parents could find a scheme that suits them. Despite that, equity release isn't the answer for everyone and your parents need help to come to the right decision and find the right deal for them.
Homeowners who are 55 and over often find that almost everything they own is tied up in their property and they have very little left over to live on – asset rich and cash poor. Equity release allows them to take some of the value of their bricks and mortar as a lump sum or regular smaller sums, and stay in their home without having to make monthly repayments. Of course the deal with the lender will be that when the property is eventually sold the lender will get their money back. Your inheritance will be reduced as a result.
Your parents need to make sure they don't get involved with a rogue lender. Only buy an equity release scheme from an organisation licensed and regulated by the Financial Services Authority.
You don't want to interfere but you can persuade them that they should take the time go into this in detail. Find them an independent financial adviser who has experience of these kinds of plans and can talk them through the pros and cons.
You'll find more information at equityreleasecouncil.com or from Saga or Age UK.
Q: I took out a payday loan a few months ago when I needed an emergency repair on my car. But a few weeks later I was made redundant. I'd only been in the job a short time I didn't get any redundancy money. I haven't been able to get back into work so far and now the loan company is really piling on the pressure and the interest. At this rate I'll never be out of debt. I'm really worried, it's affecting my health and I can't tell my husband what I did.
A: You aren't alone on this. More and more people are finding themselves in your situation. These high interest loans can be life savers in an emergency – as long as you can pay them back in full on time. But they can cause mayhem in people's lives if things go wrong.
Charities that advise people in debt are working with the payday lenders to persuade them to treat borrowers in your situation more sympathetically. They want lenders to freeze interest and charges as soon as they realise their customers have lost their jobs, and to set up affordable repayment plans.
In the meantime get help from one of the free debt advice agencies like the Citizens Advice Bureau on the high street, call CCCS on 0800 138 1111 (cccs.co.uk) or the National Debtline on 0808 808 4000.
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