Mazen was hoping to retire soon, which meant that he needed to wind down his business and pay off his debts. His wife, Anisa, hadn’t worked for several years. So they decided that this was the time to sort out their finances.
A friend of theirs had recently signed up to an equity release scheme, and they passed on the company’s details to Mazen and Anisa. After Mazen spoke to an adviser about his circumstances, he agreed to take a lifetime mortgage against his home. The amount came to £180,000, which was about a third of the house’s value.
Over the next few years, Mazen and Anisa sadly had a few health problems. Anisa developed dementia and Mazen was suffering with some physical conditions. This meant that they were relying on home care visits.
Their niece, Ayesha had power of attorney for them and their affairs and got in touch with the mortgage company. She was concerned about the lifetime mortgage after reviewing Mazen and Anisa’s finances.
She felt that they didn’t really need the money, and that they hadn’t really understood what they were signing up to. Specifically, she didn’t think that they had been made aware of the tax implications. Because of Mazen and Anisa’s health problems they had to move to a smaller house, which was more manageable for them. Ayesha was unhappy that there would be an early repayment fee.
The mortgage company looked into Ayesha’s complaint, but they felt that they had made the right decision. So Ayesha asked us to take a look.
What we said
Ayesha explained to us that Mazen didn’t really remember his meeting with the adviser. But he did feel that the mortgage company hadn’t explained what a lifetime mortgage would involve. To help us make our decision in this case, we needed to establish what was said in Mazen’s meeting with the adviser.
We asked the mortgage company to send us their records of the meeting with Mazen. The notes said that the adviser and Mazen had gone through what money he thought he might need – to first pay of his business’ debts, then for his retirement. The notes also showed that Mazen had talked about refitting their kitchen, as well as putting some money aside for holidays.
When we asked Ayesha about this, she did say that they had improved their kitchen, and had some holidays. But this was only when they were physically well enough to. She felt that they would have had enough money to do these things as when they took out the mortgage, they had considerable savings.
We didn’t find any evidence that Mazen had mentioned their savings. We actually saw in the notes that the adviser mentioned that whilst they had a lot of equity in their home, they had very little cash and savings.
Based on the evidence that Mazen wanted to pay off his business’ debts, have enough money to retire on and take regular holidays with Anisa, we didn’t think that the loan amount was unsuitable. We felt that the adviser could only go on the information that was given to them by Mazen.
In the records, it also showed that Mazen’s business accountant had been at the meeting, and had asked some questions to clarify Mazen’s tax position. The mortgage company gave us a copy of a letter sent to Mazen and Anisa after the meeting. This had details of what had been said in the meeting and the recommendations given. We also noted that Mazen and Anisa had two months to decide whether they wanted to go ahead.
We felt that Mazen and Anisa had enough time to decide if this was right for them. They also had a financial professional that could help with any questions. This would include the impact on their tax affairs.
We then looked into Ayesha’s concerns about the early repayment charge. We felt that if Mazen and Anisa’s health problems had already begun, the adviser would have made note of this. The adviser would have also then taken into account the possibility for them selling their home. But we couldn’t find anything to suggest that their health problems were happening at this point. We looked at the terms of the mortgage, and the early repayment charge was clearly mentioned. But the charge being applied would depend on the circumstances.
We explained to Ayesha that if the charge was applied, and she didn’t agree, this would need to be raised separately with the mortgage company. We could then look into this claim if she wanted us to.
We understood that Ayesha was caring for Mazen and Anisa and wanted to do the best by them, and we were sorry about the health issues they were having to face. But based on the evidence from both sides, we decided that they hadn’t received unsuitable advice. We made the decision to not uphold Ayesha’s complaint.