Struggling to pay your mortgage, or need help with other payments? If you have decided that the only way to manage these costs is to sell your home, then you may be interested in a buy and rent-back scheme. These allow homeowners to sell their home for a good price, but remain in the building and pay rent to the company who has made the purchase. There are advantages and disadvantages to this type of house sale, but it can be the best option for those in a tight financial hole. If you are considering this type of solution to your financial problems, then you may need to learn more about the schemes and understand what the implications of such a sale and rent-back scheme could be.
Different types of schemes
There are several different types of scheme which offer help to people struggling to pay their mortgage. There are two varieties which are operated by social housing offices, and are known as ‘homelessness prevention‘ and ‘mortgage rescue’. These schemes are only open to those in social housing or who are willing to put their house into the hands of officials. Sale and rent-back options, on the other hand, are usually offered by private companies who want to make money on the rent that they are charging customers. This means that these schemes are more open for sellers, and are also more likely to expose a risk.
What happens in a sale and rent-back scheme?
You can find companies who are willing to offer you money in order to take ownership of your property, then you still need to understand the process which is involved in the sale. Firstly, either you will approach the company, or they will approach you. When this happens, you can then open up a dialogue with the company about the house sale process. The company has to check your finances to ensure that you can afford the deal, and will also have to arrange a valuation of the property if you have not already performed one. They must also allow you to have a cooling-off period of 14 days in which to assure yourself of your decision. If you continue to agree to the sale, then they will purchase your house for a reduced rate, and you can then start paying rent to the company.
Things to consider
If you are tempted into using a sell and rent-back scheme, then you need to consider the risks and options in this decision:
- Sellers will not own their home
- Rent could increase
- You could lose the home after the fixed term expires
- You could face eviction after the fixed term
- The property could be repossessed if the company itself gets into financial problems
- If you sell at the reduced rate, you could fail the test for bankruptcy, affecting your finances in other areas.
- You will have to accept less money for your home than with a quick sale or a traditional house sale.