What is mortgage to rent?
mortgage to rent companies purchase people's homes for less than the
market value, typically 60% to 70% - although in some cases even less, generally
paying all fees and costs, and then rent the property back to the original
owners at market rent, or sometimes less than their mortgage payments if these
were lower than the rental value. Homeowners can use the cash to settle their
existing mortgage and any outstanding debts, while remaining in their own home.
Some companies offer the opportunity to buy the house back at market value at a
later date.
mortgage to rent in Scotland agreements allow homeowners to sell their property at a
discount price to a company, which will then rent it back to them at market
rate. Despite the fact that they will sell their home for tens of thousands less
than it is worth, the advantages of mortgage to rent may seem attractive to
borrower in arrears, especially as deals are advertised on the basis that they
can be conducted swiftly and quietly with no need to tell neighbours or even
family.
Why would someone choose mortgage to rent in Scotland?
Selling your home for tens of thousands of pounds less than it is worth is not
an attractive prospect. But those fearing repossession due to mortgage arrears
and facing large personal debts may see it as a simple way out of trouble.
Companies heavily promote their ability to complete in a week if necessary,
their payment of legal fees and willingness to help customers sort out their
debts. Most mortgage to rent operators in Scotland claim vendors may only get 85%
of their property's value by selling on the open market and say they will pay
between 70% and 90%, depending on a surveyor's valuation.
But with mortgage to rent companies generally paying for the survey, there is
an incentive for the home to be undervalued in the first place, slashing the
householder's return to 60% or lower of their property's value.
Firms that offer mortgage to rent also promote discretion, saying that
neighbours need not know there has been any change in status, while families can
stay in the same home and children can continue to attend the same school.
What are the disadvantages?
Although not so much in Scotland, the biggest drawback is that homeowners are selling their property for less than
it is worth and will then end up paying the equivalent of the new owner's
mortgage.
mortgage to rent and quick sell companies deal with those
needing to settle debts, swiftly relocate, avoid a property chain breakdown, or
who have below-par homes that are difficult to sell. These all help companies to
negotiate with sellers and drive down the price. Never forget that
mortgage to rent companies are deliberately targeting those who need or want
to sell in a hurry and taking advantage of this to buy a property for less than
it is worth. If they were not doing this, the deal would be pointless for them.
The quality of service from mortgage to rent firms can differ widely,
whether Scotland or England with
some more established operators seeking to protect their reputations but others
simply out to make a quick buck. The services are unregulated and most offer no
security in terms of long-term tenancy or rent levels.
In the worst case scenario, a previous owner could find themselves evicted at
the end of a six or 12-month assured short hold tenancy having sold their home
for a bargain price. Please be careful of this we do not supply
information to firms who adopt this policy, especially in Scotland.
Furthermore, some smaller mortgage to rent companies only take the properties
on to their books briefly before selling them on to buy-to-let landlords. If
that landlord decides to sell, or goes bust, the original homeowner will find
themselves kicked out.
We are aware of these unscrupulous companies and have regulated advisers for
this purpose. If your interested in an initial
mortgage to rent application with
absolutely no obligation please fill in our form and we will contact you
discretely to answer any questions you have at this stage.
What are the other choices?
Would you sell your home for £50,000 less than it's worth? This is what
mortgage to rent companies would be asking the owner of a
£200,000 property to do if they purchased it at 75% of its value. Although
this scenario is not as common in Scotland.
If you have to sell up and move then accept that fact. If you need a quick sell
due to debt problems, speak to your mortgage lender. It may be able to find a
cheaper deal, switch you to an interest-only loan, or delay repayments to give
you time to sell.
It is then possible to put the home on the open market at a low asking price and
try and get the best offer possible. If you have to move to a different
property, so be it. Mortgage lenders do not want to repossess homes, it is a
complicated and expensive process for them and they are unlikely to get back a
property's true value.
Details supplied here will be strictly confidential!
mortgage to rent Scotland and the UK resources:
BBC report
on mortgage to rent,
Citiizens advice on mortgage to rent
Wordpress blog
