You may be struggling to pay your mortgage, or you need to move but are having problems selling your home. Or you may want to downsize and raise money from your home. If you're in this position, you may have heard about an exchange with delayed completion or lease options contracts.
You should be careful about signing up to one of these schemes because they can be risky. It's best to see them as a last resort.
Exchange with delayed completion means you agree a sale price for your home with a buyer. When you exchange contracts, the buyer typically pays you an agreed deposit. However unlike a normal house sale, completion of the contract is delayed for a few years.
Lease options contract means a buyer pays you an upfront amount so they have the right to buy your home in the future. The price is agreed on the value of your home now, not when the sale completes.
Under both schemes the buyer may take over paying your mortgage and make payments either directly to you or to your mortgage lender. They may also take over buildings insurance costs and agree to pay for any repairs to the property.
You usually move out and the buyer either moves in or lets your home to a tenant. However, the mortgage stays in your name until the sale completes.
It's important you know that there's no government regulation of these schemes. If you move out, you won't have much protection if things go wrong. For example, if the buyer stops making payments to your mortgage lender, you'll still be responsible for paying the mortgage. You could lose your home if you can't find the money.
These schemes are usually known as sale and rent back schemes. They allow you to sell your home to a private firm or individual, typically at a reduced price, and continue living in your home by renting it as a tenant.
Sale and rent back schemes are regulated by the government financial watchdog, the Financial Conduct Authority (FCA). The FCA checks whether firms stick to the rules. It also means you can complain if things go wrong.
Firms offering exchange with delayed completion or lease options contracts that allow you to stay in your home may be trying to get out of following the rules on sale and rent back schemes. Or they may not know they have to follow those rules. They may also not make it clear to you that what they're actually offering is a sale and rent back scheme.
There are several risks you need to think about before you sign up to one of these schemes. Remember:
If you're considering one of these schemes because you're struggling to pay your mortgage, look at these options first:
If you're considering one of these schemes because you need to move but are having difficulty selling your home, you could think about renting it out yourself, or using an agency to do it.
There are some important things that you need to consider before doing this.
If you're considering one of these schemes because you need to raise money from your home, it may be best to get independent financial advice about other ways to do this.
If you still want to go ahead with an exchange with delayed completion or a lease options contract, make sure you:
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