by Mark Johnston
Those home owners that fall behind on their mortgage repayments and find themselves with no hope of catching up and faced with the thought of having their homes repossessed, there could be a ray of light at the end of the tunnel.
Sale and rent back agreements are one option open to home owners faced with losing there homes when they are in arrears.
This option is not just available to those facing eviction due to falling behind with mortgage payments other reasons for choosing this option are if home owners are divorcing and one partner wishes to stay in the family home due to children but need to pay their partner for their share of the home, also home owners who are emigrating may want to choose this option as they can sell their house for cash then live in the property while they tie up all other loose ends.
A sale and rent back agreement allows home owners sell their home, at a discounted price, to a company who then allows them to remain in the property as a tenant, paying rent at the market rate for a fixed rental period of time. Sometimes the rental can be less than the original mortgage payments.
By choosing this option home owners are able to use the cash from the house sale to settle their existing mortgage arrears and any outstanding debts they may have. Some of these companies even offer the opportunity to buy the house back at market value at a later date.
Bad debts and rising interest rates has led to an ever growing number of sale and rent back companies. These companies typically target the vulnerable overstretched home owner.
Sale and rent back companies generally purchase properties for less than the market value, typically for 60% to 70% of its actual value, in some cases less. They do however pay for all fees and costs.
Despite the fact home owners are selling their homes for tens of thousands of pounds less than they are worth, those fearing repossession due to mortgage arrears and who are also facing large personal debt see this option as a simple way out of trouble. More so as many companies advertise their deals on the basis that they can be conducted swiftly and quietly, therefore there is no need to tell family and no one need be any the wiser.
Although on the face of it this option sounds so easy there are major drawbacks in dealing with these unregulated firms, who on the whole are looking to turn a quick profit from others, misfortune.
The quality of service from sale and rent back firms can differ widely, with more established operators wanting to protect their reputations to others just simply out to make a quick ‘buck’.
Some smaller companies purchase properties then sell them on to buy to let landlords, the problem then arises if the new landlord decides to sell or they go bust, the original home owner can then find themselves ‘kicked out’.
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