Why Sell & Rent Back
The 'sell & rent back' phenomenon has recently hit the UK streets. It is combating the credit crunch & offering protection of our homes and equity.
Thousands of people have chosen to 'sell and rent back' for various reasons, such as;
Raise cash
Illness
Divorce
Repossession
Inheritance
Retirement
Fresh Start
Quick Sale
Clear Debts
Unemployment
Equity Protection
Bereavement
And now, exclusive to NHA:
Future Investment
The new 'sell and rent back' solution is becoming increasingly popular, the main contributing factor being that we are experiencing the worst credit crunch in recent history and obtaining a simple loan or a re-finance deal is becoming more and more difficult - for many, impossible. As market conditions have changed, lenders have become very nervous in light of the sub-prime market payment defaults, having to write off billions of bad debt - debt which we are all now paying for with the new cost of lending!
Various analysts are predicting up to a 35% property crash and in this unstable housing market, lenders are reducing their risk and offering much lower mortgages and loans secured on property.
It is not hard to see why it is tough to release cash out of our homes in the present conditions.
Repossession
Click here for more information on repossessions
Protect your equity:
The average value of a home in the UK has dropped by £44.39 every 24 hours or £310.73 a week so far during 2008, as the property market slows down, according to Sky News.
House prices fell by 2.5% in March 2008, the biggest monthly fall since the last housing crash in 1992 and Britain's biggest lender, the Halifax, says the fall is more than six times higher than analysts' predictions. This is also the first time in 12 years that Halifax has recorded falls in three consecutive months, with some analysts predicting a further 35% crash over the next few years. In light of these reports, now would be a good time to protect your equity.
Unlock your cash:
The top property analysts and news reports all suggest that the value of houses will continue to fall over the next few years and all homeowners could lose a considerable amount of equity. In March alone, a property worth £200,000 would have lost £5000 - in just one month!!
So, what is the best way of releasing your equity now before it goes down too much?
Re-mortgages and loans, if obtainable, are usually secured on your home and you will pay significantly for the privilege - often resulting in large monthly payments. Selling and renting back however, uses the equity that is tied up in your property to secure the deal, so there is no interest or monthly credit payments and therefore no risk of losing your family home due to missed credit or mortgage payments. If house prices do keep falling, sell and rent back deals won't be around for long so grab one while you can.
Retirement:
The simplest way to release the equity in your home and eliminate the stress of monthly loan payments. Selling and renting back is not a loan so your age does not matter. There are NO credit forms to fill in and no stress or expense associated in moving home to unlock the equity tied up in your property.
Expense of Selling on the Open Market
It is true that if you sold your property through a standard estate agency (private sale), you would expect to get a higher purchase offer than if you chose to 'sell and rent back'. However, there are many hidden costs that you would have to incur if you did sell your property to a private buyer, including:
- Estate agency fees which are usually between 1.5-2 percent
(£3000-£4000 on the average UK home)as well as the fee to develop a HIPS pack. - Legal fees (approx £700)
- Removal costs (approx £1000)
In addition, a private sale takes an average time of 6 months - much longer in todays financial climate! It would entail you moving out of your home, something many people are trying to avoid.
All of the above costs are either irrelevant or are paid for you in a sell and rent back deal and you do not have the expense and stress of moving home.Now that NHA have introduced the new profit share scheme, there is really very little benefit to selling on the open market.
It is also worth remembering that house prices are falling the fastest in 15 years at present so the quicker you find a sale the less your cost will be either way.
