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Monday 3rd March 2008
Beware Sale and Rent Back Schemes!
Sale-and-rent-back schemes have emerged as a “quick fix” solution to release cash, but take a closer look at those schemes and it becomes apparent that there’s a clash between appearance and reality.
How does it actually work? The sale-and-rent-back company aims to purchase the property for around 70% to 80% of its market value. The property is then rented back to the original owners at market rates. This makes it possible to stay in the home and get extra money to help pay off debts and maybe leave a bit left over for spending money. In some cases it’s possible to buy the property back at market value at a later stage.
So where’s the catch? It is important to note that these sale-and-rent-back schemes are neither regulated by the FSA, nor are they approved by SHIP (Safe Home Income Plans). This means that customers are missing out on a vital safety-net. Additionally, the “quick fix”-approach does not seem suitable for such a big decision like the sale of your home. Sale-and-rent-back schemes are often promoted as a form of “equity release”, but this is deceptive since there are significant differences to the regulated equity release schemes.
Dean Mirfin, industry expert, comments: “Concern is certainly on the up about sale-and-rent back schemes, a dramatically increasing unregulated sector of the property market. In these cases, speed should really not be of the essence as such a big decision linked to the ownership of a home should be carefully thought through, including family members, and an adviser should be consulted who can discuss all possible options.”
As probably all of us have experienced more than once in our lives, there is unfortunately no fairy that can make all problems disappear with a tip of her wand. But there are still reliable solutions within the regulated equity release market that could help you achieve a better lifestyle in retirement.