Selling House and Renting - Mortgage Free

G_M

Do an SOE. It's not just about paying off credit cards etc, it's about managing your finance better and saving money - becoming better off.

DO NOT SELL TO A RENT BACK COMPANY. She will
a) not get anything like what the property is worth
b) have to pay market rent
c) have NO security - the rent can be increased later, or she can be evicted later. Then what has she got?

If she wants to free up capital, and rent again, then sell the property for the full value, and find rented accomodation. But my advice would be to look at how to stay in her own home, continue owning it, and reduce her costs.

I find it hard to understand why if "She works full time and is on a decent salary" AND she has no mortgage or rent to pay, she is finding her other costs so hard. Particularly as I assume you and your sisyer are paying rent t her for your rooms and contributing to the running costs. The thing to do is to reduce those costs.

BitterAndTwisted

Sounds like she only has a £50k mortgage so the repayments on that should be minimal at the moment. I think she should be charging her children a fair bit more for their keep as it sounds to me like she may be subsidising them quite substantially at the moment.

holly_hobby

Stoffy wrote: »

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

Yes but she won't actually be losing your rent until you move out ... and wasn't that the q - how she will manage financially when you and your sister leave ?

Until then, could you and your sister not help her further with the bills and take some of the strain off her ?

I also doubt, bearing in mind current mge rates, that she would rent anything similar than her current property for a lesser sum.

So financial management needs to be done, cut out unnecessary expenditure and shop round for necessities - suggest a visit to the debt board which would help give suggestions and support.

H

ViolaLass

Stoffy wrote: »

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

Have you ascertained that selling and renting would actually save her money? Sure, it might give her a lump sum but what about when that's gone?

Stoffy

Thanks for the advice so far. Guess these companies are not favourable to MSE'ers.

I think an SOA is needed really, I haven't got a clue what she pays out exactly, I just know she never seems to have money and she moans about bills and insurances more than anything.

Currently, me & my sister pay £200 each rent, plus I pay for our TV/Internet/phone wich is between £65 - £80 per month. My mum basically pays everything else (apart from the likes of toiletries and things which we buy ourselves).

Me & my GF our trying to save up to move out but due to silly money management when we were both younger we're still paying debts off. Its managable for now but doesn't leave much to play with and we're trying to get our own debts down as much as possible.

I'm going to sit down with her and go through some stuff. I think a lot of the time she's negligent and doesn't want to think about it really but the pressure is taking its toll on my relationship with the GF as I'm always going on about it.

antrobus

Stoffy wrote: »

...

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.

What you've described is known as a Home Reversion Scheme. How much cash you can raise depends on the age of the seller (amongst other things). But a) your mum is only 50 so is probably too young, and b) you're talking about raising more like 20% to 60% of the market value.

I think you've confused Home Reversion Schemes with Rent Back schemes, where you might indeed get 75% but at the price of having to pay a market rent for the property. And as other people have already pointed out, Rent Back schemes should come with a Serious Health Warning.

poppysarah

Stoffy wrote: »

I don't know how much the rent would be compared to the mortgage.

Have a look.
You might be horrified about the cost of renting.

Stoffy wrote: »

Currently, me & my sister pay £200 each rent, plus I pay for our TV/Internet/phone wich is between £65 - £80 per month. My mum basically pays everything else .

I think a SOA is essential at this stage.

Your mum moans about bills but has 400 quid on top of her wages to pay bills with.

Either she's moaning cos she likes moaning or she has a serious financial issue that needs addressing.

holly_hobby

If you were considering a Home Reversion Scheme (HR)... Min age for HR is 55 (generally 60+) @ 20-60% of property value, at such a young entry age she won't even release enough to redeem the current mortgage of 50k (albeit it should be a tad lower in 5 yrs if on a repayment mortgage).

Futher to which under HR, the property will no longer be owned by your Mum but by the provider, although she will have the right to reside there until entry into long term care or death (generally rent free, although some charge a peppercorn rent of £1). At which time the provider will sell the property on to recoup the loan - and you have no inheritence (as was her stated original motive for exercising her RTB option).

A lifetime mortgage (min age 55) works on the same principle, but the property remains in the ownership of your Mum, with interest on the advance rolled up on the debt - again no rental/interest payments reqd during term of plan.

You are advised (if this a possability when age suits) to seek a SHIP (safe home income plan) member, and a provider that provides a no negative equity gte.

You should be advised that the due to the nature of the plan, there may be little left to the estate upon Mums entry into long term care or death and sale of the property.

Any equity advice such as this should be sought from a suitably qualified equity release ER1 adviser, and via a reputable company i.e 1 well known provider is Aviva.

But thats a consideration for the future ...

Serious budget planning, or sale, is I fear the only current solution ...

Hope this helps

Holly

franklee

Have a play with the mortgage calculator:

http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

A 50,000 repayment mortgage at say 5% is £292 per month. She should easily be on 5% or less at the moment.

There is no way she could rent a three bed home for that. Rents are typically 4-5% ish of house value so rent would be more like £400 per month or more and then there are fees on top of that and moving costs as she won't get security of tenure on an assured short hold tenancy.

Suggest you look at other costs as the mortgage isn't the problem unless she is on a very high rate in which case can she remortgage onto a better deal?