If your debt situation is continuing to spiral out of control, you may be tempted by a sale-and-rent back scheme. This is where you sell your home at a discounted price and, in return, you will stay living there as a rent-paying tenant for a fixed term. This will free up money to allow you to clear your mortgage or other debts. The thought of living debt free is naturally very appealing to those who are suffering with money problems. However, you will face new risks by investing in a sale-and-rent back scheme.
The Important Facts
It is crucial to do all of the necessary research before investing in a sale-and-rent back scheme. Firms should provide you with a full list on information before participating. Here are a few of the main facts that you will need to obtain from the provider:
- The firm must provide you with the market value of the property following an independent valuation by an evaluator with a duty of care to you
- The price the firm will pay for the property
- The fixed term of your tenancy agreement, which must be at least five years
- The rent payable under the agreement
- When the rent can be increased
- What happens if you fall behind on rent
Risks of Sale-and-Rent Back Schemes
When you have received a written offer to buy your home, you’ll have 14 days to consider it before the firm can contact you again. This is a crucial time to consider the risks of a sale-and-rent back scheme.
- You will no longer own your home
- Your rent could go up both during and after the fixed term of your tenancy
- You may still have to leave your home after the fixed term of your tenancy agreement
- You could still be evicted during the fixed term is you break the rules of your tenancy agreement, for example if you fall behind with your rental payments.
- If the person or company buying your home gets into financial difficulties, the property could be repossessed and you may have to leave.
- The fact these schemes involve selling your home at a discount means you will inevitable get less money than you would have sold it for on the open market.
- Selling your home at a discounted price may affect your eligibility for bankruptcy or other forms of insolvency.
Sale-and-Rent Back Alternatives
These schemes should only be considered as a last resort. Make sure that you have explored all of your other options first. Speaking to your mortgage lender may prove helpful. They may be able to help you by making an arrangement to repay your mortgage arrears. You could consider selling your home on the open market and finding somewhere else to rent.
If your reason for considering sale-and-rent back is due to other forms of debt then getting free and independent debt advice to help you deal with your lenders. CTA CIC is a debt advice service that will explore all of the possible options with you, ensuring you make the right decision when it comes to sale-and-rent back. Call today and speak to one of our friendly experts.