The mortgage rescue scheme has been set up so that mortgagees can reduce their monthly mortgage repayments, hence avoiding house repossession.

Under the scheme home owners have 2 choices:

• They can receive a loan from a non profit housing association. Then they can pay back the loan when the economy improves.

• Or they can sell their home to a non profit housing association and rent back their home at subsidised rent. The property will be valued by an independent surveyor, so they will be paid the market value for their house.

However their is a catch, the home owner must meet strict criteria to qualify for the scheme

• You must be a family with dependent children.

• Or a family who are looking after a disabled, elderly or vulnerable person. We are not actually shore what they mean by “vulnerable”.

• Your household income must be less than £60,000 per year.

The Department for Communities and Local Government believe that up to 6000 households will be able to avoid house repossession as a direct result of this scheme. They predict that 75,000 home owners will loose their home in 2009. So this scheme will help 8% of homeowners who are facing house repossession in 2009. However this is part of the larger scheme to help home owners avoid house repossession.

Most of the schemes appear to be designed to help families, rather than home owners who are single. Do you think the government are being biased with their support?

The idea is that a company buys your property, which you then rent back from them long term. You don’t have to lose your home when you get in trouble with your mortgage. In principle, a sound idea, or is it?

Before the economic slow-down sell and rent back schemes were relatively low key, not particularly common in a healthy, strong property market. But since the property market started to collapse, sell and rent back providers have been finding fertile ground.

Sell and rent back schemes started to raise concerns back in October ’07 when the Citizen’s Advice Bureau (CAB) flagged what appeared to be a growing problem. So much so that the schemes were labelled a disaster waiting to happen. Sell and rent back companies were increasingly paying less than 60% of the value of homeowners’ properties. And, taking advantage of consumers who were too distressed to think straight, some were giving nothing more than a standard six to twelve month tenancy in return.

Since Northern Rock first kicked the UK economy into a downward slide the number of companies offering sell and rent back has rocketed. Just do a Google search and you’ll see the evidence. Some are large firms who offer decent guarantees, others are small outfits searching for bargains and distress buys. But whatever size they are, most operators don’t offer a long term rental guarantee. Far from it. In fact many former homeowners have found themselves evicted once their Shorthold Tenancy Agreement expires.

The charity Shelter and the Council of Mortgage Lenders added their voices to the CAB’s concerns and the Office of Fair Trading (OFT) launched an investigation in response. John Fingleton, the OFT’s Chief Executive, explained, “Our research shows that sell and rent back deals have potential to cause serious and permanent harm to often vulnerable homeowners. The unfamiliar and highly pressurised situations that these people find themselves in may leave them particularly vulnerable to misleading statements or valuations from sale and rent back firms looking to make a deal.”

Unlike many financial service suppliers, sell and rent back schemes are not regulated by the Financial Services Authority (FSA). So consumers have little protection against unscrupulous suppliers. Citizens Advice is currently calling for new official regulation covering sell and rent back firms, before the problem gets a lot worse.

In October this year (2008) David Harker, Chief Executive at  CAB, said “While sale and rent back agreements might be the right thing for some people, consumers need the sort of robust and binding safeguards that only statutory regulation is likely to provide. With more people seeking advice about mortgage arrears we are concerned that these safeguards should be put in place as soon as possible.”

In the meantime? Unless you’re determined to sell and rent back – or you have a rock solid deal in writing, checked by a solicitor – don’t. There are better ways to solve your financial problems without resorting to an unregulated product that currently has a very bad reputation.

Things to consider if sell and rent back is what you want:

• Many providers offer 75-90% of your home’s market value but end up offering a lot less. Stick to your guns.
• Get full and complete tenancy details in writing and have them checked by a solicitor so that you know you are legally entitled to live there for the long term.
• Make sure your rent is agreed in the long term. Some sell and rent back providers have put rents up so much that tenants have been forced to move.
• Ensure that you have clear advice and evidence about what happens to your tenancy if your new landlord goes bust
• Don’t panic and rush into it. Your mortgage lender should be open to negotiation and they’re under instruction from the government to be flexible about mortgage arrears. Try all other avenues first.
• Take advice from an expert: visit your local Citizens Advice Bureau.

It would be great to hear from anyone who has been involved with sell and rent back schemes.

Sell and rent back – everything handled by one company
Both the purchase and rental back to you are handled by the same company, so the process is kept very simple. Most sell to rent back companies promise to keep you informed at every stage, which has to be a good thing. And the process is completely discreet with no estate agents’ boards. While the details can vary from provider to provider, these steps are standard:

Step 1 Initial valuation

A sell and rent back valuation consultant will visit you at home. He or she will explain the ins and outs of the process, answer your questions and value your property. The valuation will be calculated based on comparisons with similar properties in your local area. The offer, when it is made, comes without obligation so unless you are completely happy with the offer and everything it involves, you can still say no.

Step 2 A free independent Valuation & Survey

Once you’ve agreed terms for selling and renting back with the sell and rent back company’s valuation consultant, you appoint a solicitor. The company will arrange and pay for an independent valuation and survey, and they’ll also pay for your solicitor.
The company have an independent valuation carried out to check that their valuation is accurate and on track. The independent valuation should be carried out by a RICS member (Royal Institute of Chartered Surveyors): rics.org

Step 3 Sell to rent back paperwork

As soon as everyone’s in agreement and ready to go, and all surveys are in and satisfactory, the company will instruct their solicitors to buy your property. At this stage, you’ll need to provide any documentation needed to smooth the process. It is your solicitor’s job to explain what paperwork’s required.

Step 4 Completing the contract of sale

Once all the paperwork has been gathered and signed by everyone involved, the contract is completed. Legally, this is just the same as completion on a private sale.

Step 5 The profits are paid to you

After subtracting your outstanding mortgage and any other money owed on your home, your solicitor will release a percentage of the remaining the funds – the profit – to you. With sell and rent back schemes the sale is usually completed within twenty eight days and you should be kept in the picture throughout the process.

Step 6 – Assured Shorthold Tenancy

Your sell and rent back company provides you with an assured shorthold tenancy contact, or agreement, which gives you the legal right to stay in your home and rent it, usually for at least a decade.

HomeOwnersAdviceCentre.co.uk great site on “Sell and Rent back”.

Do you need to sell your home, but don’t want to move?

A relatively new player in the home repossession market is ‘sell and rent back’. This product lets people at risk of repossession sell their property then rent it back from the new corporate owner, meaning they don’t have to move out. The kids can stay at their current school, you keep your community and remain close to your friends. So sell and rent back can be the answer for some householders.

No costs, chains or stress. It couldn’t be easier. Or could it?

Sell and rent back is being heavily marketed at the moment as a great solution to repossession problems. Even though you sell your home and give up all claim to ownership, you can stay there so family disruption is minimised. Selling to rent back isn’t for everyone but, depending on your individual circumstances, it can help ease your situation.

Avoiding all the usual fees and charges

Sell and rent back lets you release the equity held in your home. In doing so you avoid all the usual costs and fees, as the deal includes all the charges involved in buying your home and renting it back to you. So you save thousands of pounds on estate agents’ fees, HIP costs and survey charges. And even though you don’t have to pay legal fees on sell and rent back deals, you still have your own solicitor to represent you.

You get a long renewable lease

Many cash for houses providers grant a ten year renewable lease, or assured shorthold tenancy, the UK’s standard private lettings lease. Under your lease, you’ll be allowed to rent your home back for at least a decade if you wish to, sometimes longer if you negotiate.

Get 100% market value for your house

Selling to rent back can give you the full 100% market value… very rarely. Many arrangements give you at least 30% less than your home’s market value. Most providers pay out an initial lump sum, usually about 70% of the agreed sum, on completion of the sale. The remaining 30% is given back to you when you tenancy ends.

Sell and rent back to become a tenant in your old home

On completion the company will grant you a 10 year ‘assured shorthold tenancy’.

Find out more about Assured Shorthold Tenancy agreements at:  Communities.gov.uk/housing