Avoid Property Repossession With Sell To Rent Back Agreements

If done correctly Sell To Rent Back Agreements could one of the best solutions to help you avoid home repossession.

The credit crunch and economic recession caused the number of bank repossessions to suddenly spike. Homeowners found themselves over indebted or jobless and were unable to repay their loans.

As a result a number of programs have since been developed to assist homeowners who are struggling to meet their debt commitments. Sell To Rent Back Agreements, Debt Counselling, Distressed Sales and Bank Assisted Sales are just some of the solutions available.

What Is A Sell To Rent Bank Agreement?
These agreements or sales are often initiated by client are who facing repossession, or who are struggling to meeting their debt commitments.

Typical you would sell your property to a property investment company, or sometimes an individual, who then agrees to allow you to rent the property for a period until you are able to buy the home back from them again.

What Are The Benefits?
The most appealing benefit to this whole process is that you would need to relocate your family, or face the embarrassment of having your property repossessed by the bank.

Also, when your financial situation turns around again you have the opportunity to buy your home back from the investor.

What Are The Disadvantages?
The biggest disadvantage to Sell To Rent Back Agreements is the fact the you are going to have to sell your property at a greatly reduced value.

Sale And Rent back companies typically will offer to purchase your house for far less than its market value, sometimes 60% or 70% below market value.

Read More:
Sell To Rent Back Companies In South Africa

Using Personal Loans For A Deposit On A House Purchase

Although more full 100% bonds are being granted by the banks, most home loan applicants are still required to come up with at least a 5% to 10% deposit on any house purchase.

A 10% home loan deposit on an average property in South Africa is going to amount to between R60 000 and R80 000.

It could easily take years to save up 10% of any property price, and this is one reason why many new home buyers are exploring the option of using a Personal Loan as a deposit on their home loans.

Using A Personal Loan As A Deposit Is Not Always The Smart Option

Taking a personal loan to help secure the property finance you need to buy a house is not always advisable, but it can be a great convenience and it can help you get your foot into the property market.

The personal loan should only be considered if you have enough disposable income to safely cover the monthly payment. Remember, you will also be paying a large Home Loan repayment for the next 20 – 30 years.

Personal loans are usually offered up to a maximum of R100 000 and are payable over a much short term. These short term loans are unsecured and therefor are charged that very high interest rates.

Why These Personal Loans Are Popular

One of the reasons why these loans are popular among first time buyers is because they are very likely to gradually increase their income each year – making the monthly debt repayments much easier as time goes on.

Another reason is because, banks are surprisingly more willing to offer unsecured personal loans over a shorter 5 year term, verses granting a large home loan over a much longer 20 or 30 year term.

But, the excitement and strong desire to own your own property will likely play a very important role when considering if you are able to wait and save a cash deposit or take the extra personal loan.

Take the time to consider all your options and speak to your broker before deciding, this is going to be one of your biggest financial decisions.

Alternative Option

An alternative option might be to look at a Rent To Buy Property that will enable you to rent the house to love, while you save up the deposit you’ll need for the bond.

Get the most out of Sell To Rent Back agreements

What are Sell to Rent Back agreements?
A sell to rent back plan is an agreement that enables homeowners to sell their properties to a bank, investment company or individual, and then continue living in the home by renting it back from them.

Why would you want this?
These agreements are typically attractive to homeowners who are struggling to manage their bond repayments. As a way to prevent the bank from repossessing their property the owners would approach a company that offers the Sell-to-Rent-Back option.

If you find yourself in a situation where you are unable to manage your monthly bond repayments your first step should be to contact your bank or mortgage lender. Contrary to popular belief, banks are not trying to force people out of their homes. Property Repossessions are a long and expensive process.

Your bank would rather refer you to a reliable Debt Counsellor who, after assessing your finances, will offer you a number of solutions to help you get back on your feet.

After contacting your bank, you may begin exploring the option of Sell-to-Rent-back.
There are number of institutions available in South Africa that you can approach.

These investment companies will offer you up to 70% of the true market value of your property.

This is typically a very troubling time for you and your family, therefor the sales are often concluded very quickly and very discreetly.

If you choose this route, ensure that your have your own valuation done by an estate agent or certified property valuator. This will ensure that you get the maximum payout for the sale.

After, the sale is concluded and your existing bond is settled, use the extra funds to settle your outstanding debts. Your full focus should be on restoring your finances to enable yourself to buy your property back, or buy a new property.

Sell To Rent Back agreements have the advantage of offering you protection from repossession and a blacklisting, but you should realise that this is only a temporary solution to your problems.

Don’t sit back and be content with just renting your property forever. You can be a homeowner again, it just takes a little more effort.