SALLY SORTS IT: Aviva’s £50,000 equity release fee if parents sell their home

My 78-year-old mother recently suffered a stroke and now needs long-term care, which my elderly father isn’t well enough to provide.

Before, she was caring for him in their two-storey house but now she can’t walk unaided so they need to move to a bungalow nearer to me so I can help.

But they might not be able to. About 25 years ago, when hard up, my parents took out an Aviva lifetime mortgage. 

Penalty: Avia are asking an elderly couple, who need to move to a bungalow, to pay a £50,000 repayment charge on their lifetime mortgage

They borrowed £60,000 and now owe £250,000. The interest rate is about 10 per cent but the worst is they have to pay an early repayment charge of £50,000 if they sell up. This is soul destroying.

Aviva says the fee won’t be waived unless one of them dies or both need long-term care. 

But the definition of needing care is incredibly specific — they only qualify if they can’t go to the toilet unaided. 

Newer contracts allow the penalty to be waived if just one person goes into long-term care.

This ridiculous charge is blocking their ability to move. Please help.

A.G., Henley-on-Thames.

Sally Hamilton replies: People aged 55 or over who, like your parents, are cash poor but rich in bricks and mortar often opt for a lifetime mortgage — also known as an equity release loan. 

This allows homeowners to draw cash from the value of their property without having to repay the loan (or any interest) until they die, move into long-term care or when they move house without taking the loan with them.

Your parents could have transferred their loan to a new property (‘mortgage porting’) if the lender approved of the new home. 

But they wanted to remortgage instead, which doesn’t surprise me considering the 10 per cent interest rate on their deal. I was shocked at how the original loan had ballooned.

Equity release loans are more mainstream now and the average interest rate is 8.29 pc, according to analysts Defaqto. The nub of your complaint, though, was the £50,000 early repayment charge, rather than the rate.

Exit penalty rules have improved. Aviva’s newer plans do not impose an early redemption charge so long as people have held the mortgage for at least three years. And the charge is also waived if one of the borrowers requires long-term care after the three-year period.

Sadly, this isn’t the case with your parents’ 25-year-old plan. Both must require long-term care to avoid the penalty charge.

I asked Aviva if it would waive the fee because if your parents had to pay the £50,000, their funds would fall £20,000 short of what they need for the one-storey home they had set their hearts on. When I first contacted Aviva, it said a final decision had not yet been made as it needed medical assessments for both parents.

Later, with the forms completed, Aviva said your mother was eligible for long-term care but your father did not meet all criteria. But it did concede he required assistance with his mobility.

Happily Aviva looked at this last aspect and waived the fee.

A spokesman says: ‘In exceptional cases we look at other evidence, in addition to the medical assessment, to form an overall view of customers’ circumstances.

‘Having reviewed all the evidence, we have decided the early repayment charge should not apply.’

You were delighted. The next step is to arrange a more modern — and hopefully cheaper — lifetime mortgage on their new property. You are optimistic the move should be possible now they have the extra £50,000 to spend.

Breakdown claim fell between a rock and a hard place

On a camping holiday in France, I was driving my family along a mountain road near Grenoble after a thunderstorm.

We went around a corner — at fairly low speed due to heavy rain — and went over a rock sitting in the middle of the carriageway. It hit hard under the front right wheel, putting the car out of action.

I thought RAC breakdown would rescue us but I was wrong: please help as I am worried I won’t be able to get us home.

R. L., Bristol.

Sally Hamilton replies: In your panic you tweeted me for help. You explained you bought £150 RAC European breakdown cover (Comprehensive Plus) with your RAC motor insurance to ensure all risks were covered.

But when you hit that stone, you found to your dismay your claim fell between a rock and a hard place, if you’ll excuse the pun. In your eyes, the car had broken down. But as far as the breakdown side of RAC was concerned, you had had an accident.

This meant your RAC motor insurance rather than the breakdown policy revved into action. But this revealed a gap in your cover.

Although the insurer agreed to have your damaged car towed away and repatriated to Britain, as well as pay for a rental car, the latter only covered you for your travel in France.

This left you worrying about how to get your family and camping kit onto the Calais to Dover ferry and back home to Bristol.

Had your car broken down, this would have been covered by the breakdown policy. But not so under your motor insurance.

I contacted RAC and suspect because it could see you were a loyal customer, and even though your chosen level of cover excluded repatriation of passengers, it had a change of heart. It helped get you and your family home as a ‘gesture of goodwill’. This included a £570 taxi fare from Dover to Bristol.

Your experience is a lesson to all holidaymakers to check that every eventuality is covered before setting out on a road trip abroad.

• Write to Sally Hamilton at Sally Sorts It, Money Mail, Northcliffe House, 2 Derry Street, London W8 5TT or email [email protected] — include phone number, address and a note addressed to the offending organisation giving them permission to talk to Sally Hamilton. Please do not send original documents as we cannot take responsibility for them. No legal responsibility can be accepted by the Daily Mail for answers given. 

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