With many people having had a really tough time of it over the last couple of years things could be a bit stretched financially. Often people in debt make bad choices like using credit cards for day to day expenses like shopping. Sometimes it can seem like there is no way out and you are spiralling towards bankruptcy. This is an awful situation to be in and luckily nowadays there are other options, one of which is where you sell your house and then rent it back.
Sale-and-rent-back agreements allow homeowners to sell their property at a discounted price to a company, which will then rent it back to them at market rate. Even though you will be selling your home for a cheaper price, often tens of thousands of pounds less than the market value, many are finding the scheme attractive.
The benefits can be great if you are in the right situation. Usually the deals are quick to be completed and are very hush-hush so borrowers can keep the transaction quiet from friends and family.
Usually the house is sold to the company for about 60% to 70% of its market value but it can be less than this as costs and fees are taken out of the sale price. Then the company rent the property back to its original owners at an agreed monthly rate. This rental price can be lower than the original mortgage payments which gives the borrower more money a month to live on or to pay off debts.
The homeowner will then use the cash from the sale to settle the original mortgage and use anything left over for any outstanding debts. Some companies offer the opportunity to buy back the house at the market value at a later date.
As with any major financial transaction it is vitally important to read the small print and make sure you know what you are agreeing too. It is also probably a good idea to talk to an independent financial advisor before you sign anything.
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