If you want to sell your home and rent it back
If you're struggling to pay your mortgage, you might be thinking about using a ‘sale and rent back’ scheme. This is when you sell your home to a private company and rent it back from them. These schemes are also known as ‘buy back’ or ‘sale and lease back’.
Sale and rent back schemes can be risky. You should check what other options you have before using one.
If your mortgage lender wants to repossess your home
You can get help from the government or your local council.
Get help from the government
You might be able to apply to the government’s ‘Help to Stay’ scheme.
If you use the scheme, you can get a shared equity loan to help with your monthly mortgage payments. This means the amount of money you’ll get is linked to the value of your home. If the value of your home goes up, you’ll need to pay more money back.
To be eligible, all of the following must apply:
you can’t, or won’t be able to, pay your mortgage and are at risk of losing your home
you only have one mortgage on your home
your home is in Wales and worth up to £300,000
your household income is less than £67,000
you’ve already had free debt advice
If your application is accepted, you’ll get help from a mortgage adviser to decide if the scheme is right for you.
Get help from your local council
You might be able to get help from your local council through a mortgage rescue scheme.
If your local council offers the scheme, they'll run it with a local housing association. Using a mortgage rescue scheme should give you more security than selling and renting your home through a private company
If you use a mortgage rescue scheme you might be able to:
get a shared equity loan to help pay off what you owe - you’ll need to pay this back, but you won’t need to pay interest
sell your property to the housing association and rent it back
Your local council can help explain more about the scheme.
The local council will decide if you're eligible for the scheme by looking at your situation. For example, they'll think about whether:
you’ll be homeless if your property is repossessed
you own any other properties
you live in specially adapted housing because someone in your household is disabled
you’re able to sell the property and buy a cheaper home locally
You should check if your local council offers a mortgage rescue scheme and how you should apply. You can find your local council on the Welsh government website.
If you need help applying to the scheme, talk to an adviser.
Check if you have other options
You should get help to deal with your mortgage debts so you can try to keep your property. Check your other options for dealing with your mortgage debts.
If you need to sell your home, you might be better off selling it on the open market and finding somewhere else to rent. You’ll usually make more money from the sale and could use this to pay off any other debts you might owe. Find out more about selling your property to clear mortgage debts.
If you decide to use sale and rent back, make sure you understand the risks. Check the terms and conditions to see how it could affect your long-term housing and financial situation.
Risks of using sale and rent back schemes
Sale and rent back schemes can be risky because:
you’ll usually sell your home for less than it’s worth
you’ll be renting, which means you could get evicted
you might have problems if you want to claim bankruptcy or get a Debt Relief Order
you might not be able to claim some benefits afterwards
sale and rent back firms often break the rules they’re meant to follow
You’ll sell your home for less than it’s worth
Sale and rent back firms usually buy homes below the market rate - this means you could end up losing money. Your mortgage lender can refuse to let you sell your home if the price you're being offered is less than what you owe on your mortgage and any secured loans you might have.
You could get evicted
When you sign up to a sale and rent back scheme, you’ll usually rent your home back on the basis of a fixed-term standard occupation contract. When your fixed-term contract comes to an end, it’s very easy for your landlord to evict you - even if you've done nothing wrong.
You can also get evicted during your contract if:
you go against any of the terms of your occupation contract, like missing rent payments
your new landlord gets into financial difficulties and your home is repossessed by someone they owe money to
your fixed-term contract has a break clause
This means that if you use a sale and rent back scheme, you might still have to leave your home anyway. You should think about whether you’d be better off selling your home for its full value on the open market and renting somewhere else.
You might have problems claiming bankruptcy or getting a Debt Relief Order
When you use a sale and rent back scheme, it could cause problems in the future if you want to:
apply for a Debt Relief Order to write off your debts
apply for bankruptcy
Your Debt Relief Order application could be refused if you sold your home for less than its true value in the last 2 years.
If you go bankrupt, the person who manages your bankruptcy is called the ‘official receiver’. If you sold your home for less than its true value in the last 5 years, the official receiver can reverse the sale. They’ll usually resell the property for its true value. The official receiver might evict you before they sell the property - or the new owner might evict you.
You might not be able to claim benefits
If the government thinks you sold your home for less than its true value, they can stop you claiming some benefits. You might not be able to claim the housing element of Universal Credit or Housing Benefit until 5 years after you sold your home.
You might be able to claim benefits if you had to use sale and rent back - for example, if your mortgage lender was seeking possession. If the Department for Work and Pensions (DWP) or your local council refuse your benefits claim, you might be able to appeal.
Rules sale and rent back firms must follow
There are strict rules that sale and rent back firms have to follow. These are designed to give you better protection. The firms:
aren't allowed to post promotional leaflets through your letter box
must check you can afford to enter into an agreement with them and how that might affect your entitlement to benefits
must give you a fixed-term standard occupation contract of at least 5 years
must arrange for an independent valuation of your home if you haven’t already got one
must give you a 14-day cooling-off period after you sign up to give you more time to decide what to do
Sale and rent back schemes are regulated by the Financial Conduct Authority (FCA). This means the FCA checks whether firms follow all the rules and makes sure they meet certain standards. The FCA has previously found many serious problems with a number of sale and rent back firms.
Sale and rent back firms must be registered on the Financial Services Register. Before you use a sale and rent back firm, check the register on the FCA's website.
If a sale and rent back scheme hasn’t followed the rules
You can complain to the Financial Ombudsman Service. Check how to complain on the Financial Ombudsman Service website.
Get independent financial advice
If you're thinking about signing up to a sale and rent back scheme, you should get independent financial advice first.
Adolygwyd y dudalen ar 26 Mehefin 2023