Lifetime Mortgage

[trevor33]

I have elderly relatives who now need help with their finances.

 

I was going through the paperwork and found details of a lifetime mortgage with Aviva.

 

They borrowed £17,000 in 1999.

 

It seems that the interest charged on the loan is OTT.

 

£3,574 has been added in the last 12 months and the interest rate was fixed at 2.9% compound.

 

They owe over £58,000 as at the end of August 2013 on the original loan, so that is 14 years worth of interest.

 

They are in their mid 80's and could possibly have another 10 years of interest to pay.

 

How is this interest worked out and is Avivas calculation near the mark.

[honeybee13]

Hello there.

 

Do your parents have a copy of Aviva's calculations please? I think the only way to understand what they've done is to check that. If there is nothing in writing from Aviva, then I would ask them to explain how the figure was arrived at in a letter.

 

My best, HB

[trevor33]

Thanks HB. I think there is some paperwork with regard to this but I am not sure. I have tried to work out the interest but it is like knitting fog. I do not live near the relatives so it may be some time before I can have a look for papers so will post when I can. T33

[honeybee13]

I understand the problems with communication.

 

But when I've dealt with stuff like this, the starting point has always been trying to understand how the figures were worked out. If Aviva send their workings, then you can start to check if they're right or not.

 

Would your parents be willing to sign a letter authorising you to ask for information from Aviva, do you think? That way Aviva could send the information direct.

 

HB

[trevor33]

Thanks HB. I am looking at Power of Attorney at the moment so things should become much easier. Will post when I view the documents. T33

[trevor33]

Hi HB. Just gone through some papers in my possession and come across the loan agreement for the mortgage. it seems the interest is calculated on the original property valuation and not on the amount borrowed. The valuation in 1999 was £85,000 so the interest is compounded annually by 2.9%. This seems a lot. In the first year £2465 interest was added. In the second year £2536 was added. Seems like a very good earner to me. T33

[honeybee13]

Hi HB. Just gone through some papers in my possession and come across the loan agreement for the mortgage. it seems the interest is calculated on the original property valuation and not on the amount borrowed. The valuation in 1999 was £85,000 so the interest is compounded annually by 2.9%. This seems a lot. In the first year £2465 interest was added. In the second year £2536 was added. Seems like a very good earner to me. T33

 

Possibly, yes.

 

I think it's still worth asking how they have worked out the figures though, in case it gives you some leverage. Up to you though.

 

HB