NoRegretsCoyote
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Life Loans are back
- Thread starter NoRegretsCoyote
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Brendan Burgess
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I didn't bother reading it. I don't take offence at anyone referring to me as Burgess. Bronte does it all the time on Askaboutmoney.
Most people know that he is a loose cannon. Being insulted by him doesn't really bother me. If someone whose views were respected said what he said, I would be more concerned.
He is actually very well meaning. His objectives are honourable. But his ego is huge. He loves being on TV and radio and tweeting. He makes money from a business which is absolutely fine. And he spends a lot of time genuinely helping people. But he does enormous damage paralysing people into inaction with talk of tsunamis of repossessions. And, of course, he is also contributes to the very high mortgage rates in Ireland because he creates an atmosphere which makes repossessions impossible. And, the taxpayer gets completely screwed by his Mortgage to Rent Scheme.
I understand that he had a small shareholding and was a director and Chairman for a while. When that article refers to it as "his club", I don't think that they meant that he owned it.
Brendan
Do you want to rethink this maybe. So what if adult sons and daughters had to pay back a loan their parents had taken out to fund the adult daughters wedding or sons house deposit, or taken out the money to hand it directly over to the son or daughter. Where is the evidence vulnerable people were put through awful trauma as I’m not seeing it. Do you have any sympathy for older people who need to adapt their house in their older years and the only way they can do it is via this type of loan. Nobody asked any of the adult sons or daughters why didn’t they borrow money to pay for the renovations on their parents houses. Or why they let their parents borrow money to fund their weddings or house deposits.
This would never work in practise. It also would be way too messy legally. As in which child would pay and who gets what.
Gordon Gekko
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The rate would be higher as well, as the risk/timeline would be greater.
The Seniors Money/Spry option is really good in that regard. You can pay it back over the first 10 years (up to 10% a year basically).
Duke of Marmalade
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Not sure about that. Fixed interest roll-up is the longest duration arrangement as it is in effect the commitment to onward lend future interest payments at fixed terms.
"Interest only" was targeted at those who were income rich/asset poor, which is generally the opposite of those who would be seeking Life loans. How were they going to pay the interest? From the State pension? In any event, they can always "pay" the interest at any time albeit possibly subject to break fees.
Unfortunately programmes like Joe Duffy thrive on “hard luck stories”, “victims of large institutions “ etc. The programme is more concerned with creating controversy, generating coverage than “truth telling”. I remember back to the start of the last “crash” when Joe spent a week encouraging people to withdraw their money from the Banks, suggesting that they were not safe (which itself would have resulted in the collapse of the Banking system).
As for BoI going on the programme, they would have nothing to gain by joining a verbal battle with those who have no understanding of the product or no interest in the truth. There are still lots of people who believe that loans should not be repaid, that loans should be interest free, that Banks are the epitome of evil. BoI appearing on the programme would only give more oxygen to the controversy.
As for BoI going on the programme, they would have nothing to gain by joining a verbal battle with those who have no understanding of the product or no interest in the truth. There are still lots of people who believe that loans should not be repaid, that loans should be interest free, that Banks are the epitome of evil. BoI appearing on the programme would only give more oxygen to the controversy.
Case Study - Catherine, speaking for her mother
- End of 2006 borowed 120K at age 67
- house value 800K
- widowed young and wanted to travel to see her2 children abroad, she has 3 children,
- Borrowings were based on 15% of the house value, now the loan is worth 50% of the house
- owes 288K (that's 120K capital and 168 interest)
- current house value 575K/600K
- last year the interest was 14K
- mother has no clear sense of compound interest being explained to her
- was given no clear proper breakdown, not clearly spelt out to her
- or about it being a big problem if she lived to a certain age, she is now 82
- mother very organised as regards paperwork
- felt she had no choice but to take loan
- shocked every year when she got the bank statement
- never talked about it
- upset about inheritence for her childen, she's living too long, feels pressure, feels her children would be better off if she were dead, guilty for being alive
Observations
A lot of the talk of how much is owed to the banks don't mention that the original 'Capital' is part of the 'bill'. No mention of why the daughter is not reassuaring her mother that it does not matter if there is no inheritence.
Contradictions,
That the mother keeps all her paperwork but yet we don't know of the original loan agreement and it's paperwork
You don't get a loan of this magnitude without proper paperwork.
Is 67 widowed young. 120K buys a lot of travel.
Also BB posted this in 2016:
I got a copy of the Life Loan documentation handed out when the mortgage was taken out.
It's couldn't really be any clearer:
Amount of Credit Advanced: £100,000
Period of agreement: The date of death of the borrower (estimated to be 16 years)
Number of repayment instalments: 1 at end of period of agreement
Total Amount repayable: £289,000
Cost of credit: £189,000
APR: 6.9%
Solutions
Mother could have sold the 800K house, moved into a 400K house and had 400K to spend on travel and 'things'. In year one when she saw the fist statement that 'shocked' her she could have paid back the 120K or the guts of it, and sold the house then.
Sell house now, she will have 288K.
Opinion
I find I hard to believe a very organised woman doesn't understand compound interest, it's not rocket science, find it difficult to understnad why she hasn't already sold the house, problem solved, and it's terrible she is made to feel guilty about her children's inheritence. She is under no obligation to leave them anything. This is coming up a lot. I wonder what actually happened the 120K.
- End of 2006 borowed 120K at age 67
- house value 800K
- widowed young and wanted to travel to see her2 children abroad, she has 3 children,
- Borrowings were based on 15% of the house value, now the loan is worth 50% of the house
- owes 288K (that's 120K capital and 168 interest)
- current house value 575K/600K
- last year the interest was 14K
- mother has no clear sense of compound interest being explained to her
- was given no clear proper breakdown, not clearly spelt out to her
- or about it being a big problem if she lived to a certain age, she is now 82
- mother very organised as regards paperwork
- felt she had no choice but to take loan
- shocked every year when she got the bank statement
- never talked about it
- upset about inheritence for her childen, she's living too long, feels pressure, feels her children would be better off if she were dead, guilty for being alive
Observations
A lot of the talk of how much is owed to the banks don't mention that the original 'Capital' is part of the 'bill'. No mention of why the daughter is not reassuaring her mother that it does not matter if there is no inheritence.
Contradictions,
That the mother keeps all her paperwork but yet we don't know of the original loan agreement and it's paperwork
You don't get a loan of this magnitude without proper paperwork.
Is 67 widowed young. 120K buys a lot of travel.
Also BB posted this in 2016:
I got a copy of the Life Loan documentation handed out when the mortgage was taken out.
Bank of Ireland's Life Loan on Joe Duffy
Yes, a bank could offer such a scheme now. There is no reason not to. An elderly person can sell their house and give away the proceeds. The existence of the Fair Deal scheme does not stop them from doing so, unless they are already in the scheme. Brendan
www.askaboutmoney.com
It's couldn't really be any clearer:
Amount of Credit Advanced: £100,000
Period of agreement: The date of death of the borrower (estimated to be 16 years)
Number of repayment instalments: 1 at end of period of agreement
Total Amount repayable: £289,000
Cost of credit: £189,000
APR: 6.9%
Solutions
Mother could have sold the 800K house, moved into a 400K house and had 400K to spend on travel and 'things'. In year one when she saw the fist statement that 'shocked' her she could have paid back the 120K or the guts of it, and sold the house then.
Sell house now, she will have 288K.
Opinion
I find I hard to believe a very organised woman doesn't understand compound interest, it's not rocket science, find it difficult to understnad why she hasn't already sold the house, problem solved, and it's terrible she is made to feel guilty about her children's inheritence. She is under no obligation to leave them anything. This is coming up a lot. I wonder what actually happened the 120K.
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Case Study - David - he was on the show in 2016 and we discussed it at the time.
- 2004 Mother was 82 and needed 8K for a car
- House worth 201K, offered 63K, took 25K, was offered 2.5 times value of home.
- 2013 had dementia and made ward or court, loan now 68K, 2015 86K and died at age 96 in 2016
- bank took every penny owed
- mother was aken advantage of, she was religious and she used the money to go to Lourdes
- he's a business man all his life
- the banks screwed her, in 12 years 85K
- his story was published by Charlie Weston in the Indo
- 2004 Mother was 82 and needed 8K for a car
- House worth 201K, offered 63K, took 25K, was offered 2.5 times value of home.
- 2013 had dementia and made ward or court, loan now 68K, 2015 86K and died at age 96 in 2016
- bank took every penny owed
- mother was aken advantage of, she was religious and she used the money to go to Lourdes
- he's a business man all his life
- the banks screwed her, in 12 years 85K
- his story was published by Charlie Weston in the Indo
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I mentioned earlier that many of these became loss making for the providers during the crash. This was mainly due to the fact that they could never create negative equity - the security was the property and the property alone. While a very simple product from a customer perspective, that simplicity makes them incredibly complex for the lender when it comes to capital requirements and accounting. There are no repayments, there's an inbuilt no negative equity guarantee which is an insurance against falling house prices, and without over simplifying it they act similar to a life assurance policy in that someone outliving the original assumptions can make it loss making.
In some countries, like the US, the products are seen as so important that the state stepped in and provided an 'insurance' against falling house prices.
These products, properly understood, and used for the correct purposes, provide a means for people to live a comfortable life in retirement. How many of us know, or have known, elderly people rattling around large houses, but won't turn on the heating because either they can't afford it, or want to have something to leave after them for their children? Or can't afford upgrades to their homes that would make their life more more comfortable? In the absence of being able to downsize within the community you want to live in, these can provide a very real service.
These work well, for both lender and customer, while house prices are rising faster than the interest rate. They don't work when house prices fall, the borrower used the money to leverage some other investment that's also lost value, or spent it on something to live beyond their means keeping up with everyone else.
For anyone interested in learning why we may never again see banks offer these products here, and therefore a lack of competition in the market, the following is a good general intro, without getting too technical. Although UK based, it largely applies here, including the capital regulation pieces.
link.springer.com
In some countries, like the US, the products are seen as so important that the state stepped in and provided an 'insurance' against falling house prices.
These products, properly understood, and used for the correct purposes, provide a means for people to live a comfortable life in retirement. How many of us know, or have known, elderly people rattling around large houses, but won't turn on the heating because either they can't afford it, or want to have something to leave after them for their children? Or can't afford upgrades to their homes that would make their life more more comfortable? In the absence of being able to downsize within the community you want to live in, these can provide a very real service.
These work well, for both lender and customer, while house prices are rising faster than the interest rate. They don't work when house prices fall, the borrower used the money to leverage some other investment that's also lost value, or spent it on something to live beyond their means keeping up with everyone else.
For anyone interested in learning why we may never again see banks offer these products here, and therefore a lack of competition in the market, the following is a good general intro, without getting too technical. Although UK based, it largely applies here, including the capital regulation pieces.
Risk and Equity Release Mortgages in the UK - The Journal of Real Estate Finance and Economics
Accessing elderly housing wealth through equity release mortgages (ERMs) continue to be the focus of policy debates about how to pay for social care and how to support retirement incomes in the UK. We demonstrate in this paper that the spatial concentration of this market in just a few regions...
link.springer.com
I didn't relisten to the show, but these numbers make no sense.
However, it might make sense that IEP 25k was borrowed in 2001, and the loan would have been about 85k in 2016. So 15 years, not 12, and different currencies.
Yes David was in Pounds but he, of course, once again, forgot to mention that. His actual story I analysed fully in 2016 and BB put up the link to it. Today I'm relating what we were told this week.
As for numbers making sense, wait until I get to Denise ......
Case study Denise
- 2001 Dad knowing he didn't have long to live took out a lifeloan so his wife would be secure.
- borrowed 50K (just under she said) for 15 years at 5.6% fixed
- 2004 he passed away and mother and daughter went to bank to repay the loan
- Met BofI CEO/the banks' legal people and the manager, told only option was to die or sell
- Was told they could not pay off the loan
- Denise bought the house
- This is where details are important to follow
- She said she had to pay the bank 120K. Said she had to pay stamp duty, and the interest for the next 10 years even though the loan was being repaid, there was a lot of discussion on that
- but she made one throwaway remark, about 'value of the house'.
- mentioned extortionate and that no one is allowed live in the house, which is because the bank don't want a son or daugher living there acquiring property rights.
Observations
We weren't told the full truth. I believe, subject to others correcting me that what actually happened is not the bank was repaid 120K. Instead Denise bought the house from her mother at below market value. That she paid BofI 60K of which 45/50K was the original capital. (plus 4/5 years compound interest. Stamp duty on a property of 300/400K in 2006 was 3%, so 12K. 5K solicitor, and 40 K gift tax. (I haven't worked out gift tax but you have to pay that if you 'buy' an asset for less than full cost)
So far I've not been able to figure out if it's true she had to pay 10 years interest. She said to Joe that the same thing happens when you pay back a mortgage early. Which is clearly not the case, I suspect it was a break fee she paid.
We never found out what the money was for.
Contradictions
Two things niggling me, that you can't repay early and that you've to pay future interest if you repay early
So let's have a look at the excellent and simple BofI brochure that BB posted up, the first one. Page 12 state there is a break fee, the formula is Amount X (R-R1) X time /36500. That sounds like the normal cost for breaking a fixed rate mortgage. It's the same in the 2004 and 2007 document. In addition in both on page 7/8 that you can pay it back early, subject to the break fee on page 12.
Conclusions
Denise did really well out of this. She got the home, cheaply. a 300K or 400K for 120K.
Solutions
None. Denise managed to find a solution and her mother lives with her and is now 93 which sounds like a great solution so to be perfectly frank I've no idea what she was mad about. Particularly as she managed to get a house out of it.
- 2001 Dad knowing he didn't have long to live took out a lifeloan so his wife would be secure.
- borrowed 50K (just under she said) for 15 years at 5.6% fixed
- 2004 he passed away and mother and daughter went to bank to repay the loan
- Met BofI CEO/the banks' legal people and the manager, told only option was to die or sell
- Was told they could not pay off the loan
- Denise bought the house
- This is where details are important to follow
- She said she had to pay the bank 120K. Said she had to pay stamp duty, and the interest for the next 10 years even though the loan was being repaid, there was a lot of discussion on that
- but she made one throwaway remark, about 'value of the house'.
- mentioned extortionate and that no one is allowed live in the house, which is because the bank don't want a son or daugher living there acquiring property rights.
Observations
We weren't told the full truth. I believe, subject to others correcting me that what actually happened is not the bank was repaid 120K. Instead Denise bought the house from her mother at below market value. That she paid BofI 60K of which 45/50K was the original capital. (plus 4/5 years compound interest. Stamp duty on a property of 300/400K in 2006 was 3%, so 12K. 5K solicitor, and 40 K gift tax. (I haven't worked out gift tax but you have to pay that if you 'buy' an asset for less than full cost)
So far I've not been able to figure out if it's true she had to pay 10 years interest. She said to Joe that the same thing happens when you pay back a mortgage early. Which is clearly not the case, I suspect it was a break fee she paid.
We never found out what the money was for.
Contradictions
Two things niggling me, that you can't repay early and that you've to pay future interest if you repay early
So let's have a look at the excellent and simple BofI brochure that BB posted up, the first one. Page 12 state there is a break fee, the formula is Amount X (R-R1) X time /36500. That sounds like the normal cost for breaking a fixed rate mortgage. It's the same in the 2004 and 2007 document. In addition in both on page 7/8 that you can pay it back early, subject to the break fee on page 12.
Conclusions
Denise did really well out of this. She got the home, cheaply. a 300K or 400K for 120K.
Solutions
None. Denise managed to find a solution and her mother lives with her and is now 93 which sounds like a great solution so to be perfectly frank I've no idea what she was mad about. Particularly as she managed to get a house out of it.
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Brendan Burgess
Founder
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If I get invited back onto Liveline , I will ask them to invite you as well, Red. That is a great "human" description of it.
Some researcher will surely be fired if you ever make it back on!
Some researcher will surely be fired if you ever make it back on!
If you don't mind my saying so you're incorrect on that. Joe and his team would have been delighted with Burgess being on. He ramped it up perfectly for Joe, all the blood pressure stuff, I thought Joe was going to explode before BB !! BB was exactly what Joe wanted to ramp things up. He's a master at it.
NoRegretsCoyote
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Also allows RTè to claim that they were balanced.
By any chance have you a copy of the contracts. The small print? The letter of offer.
Joe constantly made comments to keep the thing going, such as:
- the loans were for the children/Lourdes/ round the world trips
- Interest a killer
- compound interest numerious times, often implying it was rocket science
- ramping up figures, so amount of 204K owed because A Quarter of Million, which sounds a lot more dramatic
- then there's the sympathy, aha now Ann, don't say that, with his 'concerned' voice as she says she'd rather be dead
- then there's the pretence at being balanced by mentioning a Bill Tyson Financial guy in the Business Post, that gave Joe a gloss of being knowledgable as he read that out.
- then he'd put a dig in to the callers with loans for holidays and weddings. Or deposits for the children's houses
- moving on to allow Ann to butt in with the banks are usurers, or bank wants to take the house off you,
- the loans were for the children/Lourdes/ round the world trips
- Interest a killer
- compound interest numerious times, often implying it was rocket science
- ramping up figures, so amount of 204K owed because A Quarter of Million, which sounds a lot more dramatic
- then there's the sympathy, aha now Ann, don't say that, with his 'concerned' voice as she says she'd rather be dead
- then there's the pretence at being balanced by mentioning a Bill Tyson Financial guy in the Business Post, that gave Joe a gloss of being knowledgable as he read that out.
- then he'd put a dig in to the callers with loans for holidays and weddings. Or deposits for the children's houses
- moving on to allow Ann to butt in with the banks are usurers, or bank wants to take the house off you,
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