Moneymakeover Irish Times: "Life loan proves a millstone for 97 year old"

[TomEdison]

I haven't seen it written anywhere that she's not capable. Do you have a link?

I expressly said that that was a speculation. I know that the borrower is 97 years old, but I do not know what her memory, her mental capacity or her ability to communicate are — and neither does anyone else in this thread. The fact that her nephews and nieces are fighting this battle on her behalf suggests that her ability to manage her own affairs may be in some way impaired, but we can't say any more than that.

I posted this speculation to point out that assertions that she knows why she borrowed the additional €100k, or that her relatives do, or that they can find out, are unfounded. We simply do not know how much knowledge about this is recoverable at this point. .

 

[Bronte]

It would certainly not be advised on a purely financial efficiency basis.

However, it could give peace of mind that the money was available easily.

So for peace of mind it’s a good idea for older people to mortgage their homes, is that what you’re saying?

The only way to be sure that the money can be accessed would be to take it when offered.

This is a defect with the life loan offering. If they went to a financial planner with a goal of having the 100k easily available, I am not sure if there would have actually been other options to get it.

Today you can get a life loan from Spry. If you went to a financial expert it’s unlikely he’d advise against borrowing to put money on deposit.

I know many people, particularly of an older generation, who place great value on cash / liquidity. It may involve a cost but it is not irrational.

Okay , not only is it irrational it’s plain stupid. I’ve never heard of someone borrowing a vast sum of money, with interest, and compounding and putting the money into a bank account and leaving it there. The bank of Ireland, who she borrowed from, must have asked her what the money was for. They also know she left it on deposit.

Do you know older people borrowing to keep cash under the mattress?

While the net cost of doing this is, obviously, 4% p.a., my guess is that the thinking at the time was that the value of the property would continue to increase at at least 4% p.a., so that her equity in her house would not shrink and in fact would probably continue to grow.

Mad, yes. But it was a mad time.

This makes sense.

 

[Brendan Burgess]

Even today, people who apply for a loan from the credit unions are often encouraged to borrow the amount they need in full while leaving their shares intact.

So you will often have someone with a €10k loan on which they are paying 6% and €10k in shares earning nothing.

Try pointing out to them or the Credit Union that this is irrational.

And the Credit Unions call these "secured loans".

This is how the Credit Union I am a member of portrays them:

Explaining A Secured Loan - Capital Credit Union

What Is A Secured Loan? A Secured Loan is a product closely associated with Credit Unions. A Secured Loan allows members to pledge their savings to get a much-reduced loan rate. This means that if a member has €5,000 in their shares and wants to borrow €3,000, they can get a reduced rate if they […]

capitalcu.ie

Brendan

 

[Thomas1]

So for peace of mind it’s a good idea for older people to mortgage their homes, is that what you’re saying?

What’s your solution for an older couple with only state pension income and need substantial funds for home improvements / repair?

 

[getting_on]

I expressly said that that was a speculation.

OK, I get you now.

JC in her letter to the IT, wrote:

a single woman with no children received correspondence from Bank of Ireland offering her a life loan.

Having taken legal advice (she never discussed this advice with anyone), she took out a life loan of €130,000.

I'd love to know how he/she is certain of this and also that the woman never discussed the advice her solicitor with anyone and yet not know other salient information.

It is not clear why she took out €130,000 when she only needed €30,000.

What does it's not clear mean. Sounds a bit odd, if JC doesn't know they should just say so. Not clear sounds a bit like well she did say something but I'd rather not say what because that's not what we'd like her to have said.

 

[ClubMan]

If you went to a financial expert it’s unlikely he’d advise against borrowing to put money on deposit.

That's not necessarily true. An independent professional financial advisor would look at your overall circumstances and advise accordingly.

 

[Thomas1]

That's not necessarily true. An independent professional financial advisor would look at your overall circumstances and advise accordingly.

Exactly. Anyone with a mortgage and a 6 months salary emergency fund (not reasonable) is having a larger mortgage on their home than strictly needed to have liquidity.