If you are a homeowner, there may be a time when you want to release some of the capital from your property, either through a traditional equity release scheme or a sell and rent back scheme. The reasons for this are varied, although most people who take advantage of it are those who are retired, particularly people who are what are termed ‘asset rich, cash poor’. You may also want capital to pay off some debt, start a business or make another investment.
Equity release schemes have long been the most popular way of freeing up this capital, but there are some issues with them which make them undesirable. For example, releasing some of the capital from your home can result in a risk of repossession when the loan is secured against the value of the property. Also, if you release the cash through moving to a smaller property, the costs incurred with moving can put a dent in the cash you get out of it.
Sell and rent back is an increasingly popular alternative to traditional equity release schemes. It’s a simple process done through a specialist company. You get to stay living in your house and won’t have to worry about the property sliding into negative equity in the way you sometimes do with equity release schemes. You basically sell your house to the company for a percentage of the market value, they give you the cash with which you can do what you want, then you rent the house back from them.
One of the main reasons sell and rent back is preferable to equity release is that you can get more of the value of the house out of the deal. With equity release, you’re generally limited to access of around 50% of the value of the house, whereas with sell and rent back, you can typically get between 75-90% of the market value of the property. You can also set a price when you sell the house in case you decide you want to buy it back one day.
Sell and rent back is also preferable to traditional equity release as it removes the worry of paying a mortgage. It also means you don’t have the responsibilities of an owner, which takes the stress off if you decide to move later on as you won’t be worrying about the house sliding into negative equity. This is a load off your mind no matter what stage of life you’re at. Ultimately, with sell and rent back, all you have to worry about is paying the rent.
Now Try : Sale And Rent Back