Sale and rent back 'can be risky'

24/07/2009

Homeowners should tread carefully before agreeing to take part in a sale and rent back (SRB) scheme, a top advice organisation has said.
Chris Jenkins, co-owner of the Homeowners Advice Centre, said today that people struggling to make their current mortgage payments should always "consider other options", such as equity release and remortgaging.

SRB deals involve a debt-hit consumer selling their home to a third party at a reduced price - and continuing to live in the property in exchange for rent.

The sales have proved controversial recently, with some customers alleging that they have been turfed out of their home mere months after signing the contract - and others complaining that their selling prices were too low.

Partly in response to the complaints, the Financial Services Authority, the main financial watchdog in the UK, has recently taken on regulation of the sector.

Mr Jenkins said: "SRB can be an excellent way to free up equity. We have a number of tenants who are enjoying a better standard of life due to the money that they released when they sold to us.

"However, anybody who is considering a sale and rent back should remember that they will be giving away an amount of their equity when they sell their property and rent it back. Consider other options such as a remortgage or equity release and make sure that you are certain that sale and rent back is for you."

Tags; Housing Debt and Bills, Young Family Finances, Credit Card Lifestyle,

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