Tuesday 22nd July 2008
(ref:
221/2008)
Housing experts with Wigan Council are urging overstretched homeowners to think twice before entering into a ‘sell-to-rent’ agreement.
The credit crunch, bad debts and rising interest rates mean many are now beginning to feel the pinch, but housing chiefs fear homeowners could be unwittingly putting themselves at risk by trying to raise cash through selling their homes and then renting them back.
Sale-and-rent-back agreements allow homeowners to sell their property at a discount price to a company, which will then rent it back to them at market rate.
Typically, these firms offer a quick settlement which will leave the seller with ready cash to manage their debts. The downside is they will offer a price that is tens of thousands less than what the house is worth but if you rent it back they’ll charge the full market rate.
Worse still, the former homeowner may often find themselves with a short-term tenancy agreement and could face eviction in as little as six months.
Wigan Council Housing Strategy Manager, Steve Sargent explains: “Increasing numbers of people are becoming homeless as a result of selling their homes.
“Typically the seller will be offered 60 to 70 per cent of the market value of their home, often including all the usual fees and then they’ll be paying rent back to the company.
“This is usually less than the mortgage repayments but it can rise sharply once the deal has gone through. It is also worth bearing in mind that if you are unable to keep up the rent payments you may not be entitled to benefits to help you meet them, so you could be faced with court action from the company you sold your house to.”
Homeowners that need to sell up to cover debts are advised to speak to their mortgage lender first. They may be able to find you a cheaper deal, switch to an interest-only loan or delay repayments to give you time to sell.
Those tempted by the sell-to-rent option can also seek free independent, confidential advice from Wigan & Leigh Housing or from Wigan’s Citizen’s Advice Bureau.
Steve adds: “Sale-and-rent companies often deliberately target those who either want or need to sell their homes and they take advantage of this to buy properties for less than they are worth. We would urge everyone to think long and hard about these schemes before signing up. Seek out the right advice, it’s free, completely confidential and could keep a roof over your head.”
Concerned homeowners can contact Wigan & Leigh Housing, Housing Options Centre on 01942 487717 and Wigan Citizens Advice Bureau on 01942 267963.
