Selling House and Renting - Mortgage Free

Stoffy

Hi,

I’ll try and keep this simple and not too long winded.

I’m looking for a bit of advice for my mum. About 7 – 8 years ago she bought our house which she had rented from the council since we were babies. She’d paid rent for about 18 years and therefore, the council sold it for way below the market price. She’s a single parent, but myself and my younger sister still live at home and pay rent/bills and help out whenever we can.

Anyway, recently due the price of everything increasing she’s always struggling to have any free cash to treat herself a little and constantly worrying about money. She works full time and is on a decent salary but rarely has little to show for the amount of work she does. I know there are people a lot worse off but I’d like to see my mum enjoy herself a bit rather than worry all the time.

My other sister is away at Uni so only visits weekend however me and my other sister will be looking at moving out soon so my mum will be without the current money we pay in rent. She knows we need our own space as its only natural but I feel a bit guilty leaving home and leaving her with less money each month.

After a recent heart to heart she told me she’s never been as worse off as she is now and never struggled when she was paying rent. She also said she only bought the house to be able to leave me and my 2 sisters something when she “pops her clogs” as she put it (she’s 50, not a pensioner yet). Along with all the insurances and costs which come with owning your own home she pays out quite a lot (not sure how much exactly). She now knows she can also get life insurance to cover her and leave us something if she wishes.

She paid about £41k for the house and currently owes a little under £50k as she took out a loan to do the house up a bit. The house is currently worth about £95k - £105k (the house next door but one is currently selling for £115k but has been for a while). We briefly touched on the option of companies that buy your house for less than market value and allow you to live there and pay rent hassle free (apparently). A bit of research suggests they pay between 75% - 85% of the current market value so based on the average of our current house price about £80k. Therefore if she were to sell the house she’d be mortgage free and have approx £30k give or take to use however she wishes.

I’m sure this isn’t as easy as it seems but I’d like to ask if anyone has any personal experience of dealing with companies like this and if they could give any advice or recommendations regarding it.

Thanks
:beer:

poppysarah

Stoffy wrote: »

She works full time and is on a decent salary but rarely has little to show for the amount of work she does.

She needs to do a SOA.

What she has coming in
What she has going out.

Stoffy

To be honest I don't think she needs to as I she's not really in debt as such. The only thing she owes is her mortgage which along with the insurances is costing her a lot more than rent would cost. She's not really looking at saving the odd couple of quid a week as it would be no benefit to her.

The SOA's are good if your looking at freeing up cash to pay credit cards/catalogues off ect and look at reducing your debt but currently, she'll be paying out what she is now until she retires. She doesn't owe any other credit, its just the monthly bills that are too much.

I've only really come on here to ask about the companies that buy and rent back schemes and to see if anyone has any advice regarding this.

Thanks for reading anyway and I'll try and make her do one to see if she can save on anything

poppysarah

Stoffy wrote: »

The SOA's are good if your looking at freeing up cash to pay credit cards/catalogues off ect and look at reducing your debt but currently, she'll be paying out what she is now until she retires. She doesn't owe any other credit, its just the monthly bills that are too much.

I've only really come on here to ask about the companies that buy and rent back schemes and to see if anyone has any advice regarding this.

Thanks for reading anyway and I'll try and make her do one to see if she can save on anything

What bills do you think she can reduce by selling?

I think you need to be clear about how much renting would cost.

Avoid any rent back companies are they are a bad idea.

If she pays rent she will need to pay that when she retires too. Perhaps she will get state help when she retires.

Could she have a lodger? That helps increase the money in.

chez000

How much more per month is the mortgage compared to the rent?

Probably the most important things to consider if your looking at a sale and rent back is that not all of the schemes are reputable.

Next when you were a council tenant you were a secure tenant so had a ton of rights, when/if you sell you will be a shorthold tenant - less security (or rights to stay in the property) the rent will be higher than the council rent etc

Some basic advice here

http://www.moneyadviceservice.org.uk/_assets/downloads/pdfs/your_money/a5_guides/sale_and_rent_back_schemes.pdf

holly_hobby

Schemes of sell and rent back are to be avoided, as the new owner is unable to provide a lifetime tenancy (only social landlords have this capacity), and can therefore withdraw their letting to your Mum at any time (notwithstanding standard notice periods). So she may end up having to leave the property at somepoint in the future.

A better idea (as she wants to remain in the property) may be to consider "renting a room" - unde this scheme she is entitled to receive rental income of £4250 pa, without incurring income tax liability. Link for ref - http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

Hope this helps

Holly

poppysarah

chez000 wrote: »

How much more per month is the mortgage compared to the rent?

Assuming it was cheaper council rent she'd be paying before - she does need to see how much rents are in the private sector.

Rightmove also have a rent section

ViolaLass

Stoffy wrote: »

She's not really looking at saving the odd couple of quid a week as it would be no benefit to her.

I've seen people save hundreds of pounds a month by posting an SOA on here and following the advice given.

BitterAndTwisted

Most of these "sell and rent back" schemes are scams. She might think that she would have a tenancy for life but she won't. She could be better off selling the property and going into a smaller rented flat with her equity.

Stoffy

ViolaLass wrote: »

I've seen people save hundreds of pounds a month by posting an SOA on here and following the advice given.

I agree, I'm not knocking the SOA's at all. They do work.

I was just after advice on these companies rather than a way of saving her money for now

Stoffy

I don't know how much the rent would be compared to the mortgage. This is really just a thought and not something that will definitely happen. Just thought I'd ask for some advice on it first.

The lodger situation couldn't happen yet, the house is 3 bedroom, she's in one, I'm in the other and my sisters share the 3rd. Obviously when we move out there would be free room but its not possible yet