UK Money News
28th February 2008
Debt-laden Brits consider sale and rent back schemes
Rising levels of debt in the UK have prompted homeowners to turn to new methods to find a way to pay the bills, with one expert saying the prospect of sale and rent back schemes could be one option for those struggling.
The scheme, which enables homeowners facing repossession to sell their property to a company at a discounted rate and then rent it back from them, is an emergency measure but one which can help in dire straits, says the Repossessions Advice Centre.
Director Paul Fletcher explained that though it had been criticised in the past, it could be used as a solution if other avenues were closed.
"The client should always weigh up and consider carefully the pros and cons of a sale and rent back scheme against outright repossession – and in our experience [the homeowner] should aim to sell their house for no less than 75 per cent of its open market value, this is approximately the same as the realisation value after repossession," he commented.
"If a company is offering to give you a clean slate this is better than still having a debt left with the mortgage lender. People are unaware that the debt on a property continues to rise even after repossession: the interest will continue to be added until the property is sold."
More than 13,000 properties were repossessed by lenders in the second half of 2007, according to the Council of Mortgage Lenders.
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