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Sell Your House and Rent It Back

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Sell your house and rent it back

If you are in financial difficulty, for example you are under threat of repossession because you’re falling behind with mortgage payments, or you need capital for your business or another project, you may be tempted by the adverts persuading you to sell your house and rent it back. On the surface it may be a good solution to your problems: it provides immediate capital to pay off any debts, whilst allowing you to continue to live in your home; the monthly mortgage payment is replaced by rent; there is no disruption to your life; and the neighbours don’t get to know about any debt issues you may have.

However, as they say, there is never a free lunch. There are major issues if you sell your house and rent it back through any of the many companies which provide this service, which you need to weigh up very carefully before signing on the dotted line. Here are the major drawbacks:

  • You’ll be lucky to get more than 70% of the current market value of your house, and often a lot less.
  • The contract you sign will often give you no more than 12 months security of tenure – you could find yourself and your family without a home after this period, and maybe sooner if the company you sell to goes bust.
  • If that does happen, there is often a third party involved – the mortgage company – who could repossess  your home.
  • The rent you pay is more volatile than mortgage payments. If your mortgage payments rise, you can try to find a more competitive deal; you can’t do this if your rent rises.
If you are wondering how to sell your house and find yourself seriously considering this, consult your mortgage company first, to see if you could arrange a lower payment (for example by switching to an interest only mortgage, or lengthening the mortgage period) or even a payment holiday. If this fails, talk to your local Citizen’s Advice Bureau who may be able to point you towards a trustworthy financial adviser for your particular circumstances. If you do have to go down the sell your house and rent it back route because you have no other choice, choose a company which is registered with the Financial Services Authority.
Let us know if you have tried this route and what your experience has been…

 


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