Property Rescue Blog

Equity release schemes are usually targeted at the elderly, as a way of generating capital from their property, whilst being able to continue to live in their home.

There are a number of different ways of releasing equity on your home, but the most popular are either a longer term mortgage or a home reversion. A home reversion is where the homeowner sells all or part of their property to a reversion company and gets either an annual return or cash lump sum.

A home reversion can be a used to relieve debt. It provides the homeowner with instant capital which can be used to cover repayments. The downside is that once the capital has covered the debt, the homeowner is often left in a precarious financial position with no equity left in a home they only part own. Re-mortgaging, although a popular choice, often adds to financial distress. In many cases repayments on a secondary loan, when coupled with the payments on the initial loan actually increase the debt.

Current equity release schemes are targeted at the elderly for a reason. Most schemes require the lender to re –pay the loan on death. In a lot of cases, this reduces the estate of their heirs and helps keep inheritance tax down. They are not designed for debt consolidation per se but more to allow pensioners the luxury of benefiting from capital that is tied up in their home without having to move house.

Sell and rent back has emerged due to the increasing need for people to release capital from their homes before retirement age. The unfortunate reality is that for many, this is to deal with financial difficulties. The main advantages of sell and rent back are the expedience of the sale and the ability for the client to stay in their own home and if required, buy back their property once their financial problems have been sorted. The main issue of course is the fact that there is a big discount on the expected market value. But once this is offset by the money saved in interest repayments the discount may not be such a hefty deficit.

In the simplest terms, BMV is an abbreviation for Below Market Value property. What this means is that the prospective buyers pay less than the expected market value for a property. There is a section of the housing market that specialises in this area and they usually offer a sell and rent back option (at market rent) to the seller, often with a fixed term lease.  

Companies specialising in BMV property usually offer a minimum of 80% below expected retail value. Valuations are normally free and are estimated by examining the local market trends.

There are a number of reasons that people decide to sell their property at below market value. BMV sales are generally paid in cash and offer an expedient sale. Currently, the general turnaround for a house sale in the UK is 7 months and BMV sales can be completed in 24 hours. Also, companies that specialise in this area tend to deal with all aspects of the sale, including dealing with the mortgage lenders.

The rent and sale option is often utilised by people in financial difficulty, as a way of consolidating debt. The main reason for this being that it offers them the security of their own home whilst repairing their financial situation. Repossession orders have increased year on year as Britain attempts to deal with the spiralling cost of living. The advantage of a BMV sale is that it can stop a repossession order and, probably more importantly in the current credit climate, prevents the seller from acquiring a bad credit rating. The CML has recently highlighted that lenders are finding the credit crunch severely limits their members ability to advance the money for a mortgage. A bad credit rating in the current climate may prevent home buyers from achieving a reasonable interest rate.

In simple terms, Sell and Rent back (or Rent and Sale) is when you sell your house and then rent it back at a rental price affordable to you. Typically the reasons people choose to sell and rent back are for equity release, debt consolidation or motivated selling. In most cases, sell and rent back schemes will have a buy back option for the tenant, at the rate of the new mortgage.

The ability to sell your house and rent it back is a viable alternative to equity release schemes, especially if there is a need to generate cash quickly. There may be a case where you are looking to start a new business and need immediate funds as start up capital

The economic slowdown has forced many homeowners into defaulting on their mortgage and has put them at risk of repossession. IVA’s have increased year on year and debt consolidation companies has become an ever present part of the UK’s economic landscape. The advantage of selling and renting your house back, is that you are guaranteed a quick sale and the security of a roof over your head whilst attempting to deal with your financial situation.

For example, if you were looking to sell your property and emigrate overseas, an expedient sale not only releases the required funds, it also gives you the option to rent back for a certain period whilst searching for your new home. The same applies if you are looking to start a new business overseas, also providing a certain amount of flexibility if you decide eventually that you would like to emigrate as well.

Sell and Rent Back in London has been steadily increasing due to its position as the focal point of the economic market. Comparatively speaking, house prices and the cost of living have grown exponentially in London. Debt management is now of growing concern to people in the capital.

The vast majority of Sell and Rent Back companies are based online. The advent of the Internet and World Wide Web have caused many people to ask, “Should I sell my house online?.” The advantages being easy accessibility to the company and a vast array of choice. However it is important to be happy with the company you choose. The need to sell a house quickly often leads to bad choices. Do your research and look for a company that will sell your house online professionally and takes your personal situation into consideration.

As we approach the end of the year it is a good time to look back at the property market during 2007 and look at the current situation.

The year began with what had become a familiar trend of rising prices, which, it seemed, would go on for ever.  But it was not long before some commentators and financial experts were warning of potential slowdown or even disaster in the months and years ahead.  The credit crunch in the US sent shivers through the economy, the effects of which are still with us today and likely to continue for a while yet, whilst bank interest rates rose and mortgages followed suit.  By mid year we were seeing a general slow down in property prices all across the country and in the final quarter of the year prices have begun to fall.

November saw a 1.1% drop according to the Halifax – the 3rd consecutive month of falling property prices.  The Bank of England lowered its interest rate by one quarter of a per cent at its meeting in early December but the effects of this rate cut seem to be limited.  Lending between banks has become very expensive and the Northern Rock crisis has done nothing to bring confidence back to the markets.

As if this weren’t enough, some commentators are predicting that the change in capital gains tax rules, due to come into force next April, will bring a lot of ‘buy to let’ properties back on to the market as investors seek to capitalise on their gains.  The net result of this could be a ‘buyers’ market where the number of homes for sale pushes prices down.  If this prediction is realised, those who took out mortgages during 2007 could find themselves in negative equity situations.

If you need to sell your home fast but can’t find a buyer you might, justifiably, be concerned about what will happen to the market in the months ahead.  For a guaranteed quick sale speak to Property Rescue, who will make an offer on your home within a matter of days, or in some cases just hours.  The price they offer will be a little below market value but it will include the legal fees on your sale, and will avoid the need to prepare a Home Information Pack, which could save you hundreds of pounds.

Property Rescue will be happy to talk to you in complete confidence and make a ‘no obligation’ offer on your property.  If you then decide not to proceed that will be the end of the matter – no salesmen will call, nor will you be pestered by phone calls.  Talk to Property Rescue and sell your property…fast!