If you’re struggling to meet your mortgage payments, you may also be tempted to consider selling your home and renting it back through a mortgage rescue scheme.
Sale and rent back or mortgage rescue schemes
These schemes target people experiencing financial difficulties or those in danger of repossession. The scheme buys your home and rents it back to you. In theory, this allows you to stay in your home while paying rent, which may make it more affordable than repaying the mortgage. You no longer own your home and your landlord could eventually evict you, either when your lease ends or if you can’t pay your rent.
There are no public or government backed sale and rent back schemes in Northern Ireland. Any company offering this service will be a private company or individual.
‘Sale and rent back’ or mortgage rescue schemes can be run either privately or within the public sector and are regulated by the Financial Services Authority. There are no public sector or government backed schemes running in Northern Ireland.
Private companies often purchase properties at considerably less than the open market value and charge high rent to the previous owners. It is important to recognise that this may leave you in even greater difficulties.
Risks of sale and rent back
Selling the property through a sale and rent back scheme clears your mortgage debt and allows you to stay in your home for a period. However, you need to keep in mind that if you decide to sign up to such a scheme, you will no longer own your home and could still be evicted if you fall behind with your rent.
The Financial Services Authority's regulations apply to sale and rent back schemes. These should ensure some protection for you if you decide to sell your home to one of the schemes, but there may still be a great number of problems to consider:
- you will most likely be offered less money than if you were selling your house on an open market
- you will have very little security of tenure after the initial fixed term of tenancy, that you agreed on sale, comes to an end
- you will be vulnerable to eviction, as your new landlord will have the right to terminate your tenancy at the end of the fixed term (usually for five years)
- your rent may equate to the same amount as your current mortgage payments
- your landlord may increase your rent, which can result in you accruing arrears even after the sale
- you may not be entitled to housing benefit to help with the rent
- if a private company goes bankrupt after buying your home, the property will usually be repossessed by their lender.
If you are considering selling your home through a sale and rent back scheme, speak to an independent adviser before you sign up to anything. Specialist debt advisers can assess your situation in full and help you work out a better debt management plan to get you out of difficulties.