Sale and Rent Back

Posted on 7 November 2018 by Jo


What are the implications of doing a sale and rent back mortgage? Would a lender be open to a very short term rent back at the start of the mortgage?

What are the implications of doing a sale and rent back mortgage? Would a lender be open to a very short term rent back at the start of the mortgage?

Hi Jo,

The short answer is Lenders do not like sale and rent back arrangements and you will find it very hard to get a mortgage.  The reason for this is there is a danger of the vendor and lodgers having rights of occupation that pre-date their mortgage and the lender not being able to get vacant possession should they call in the mortgage debt.

This in turn would delay the sale of the property and reduce the property’s value, perhaps to a point where they are insufficient proceeds to repay the outstanding debt, arrears and costs leaving the lender with a loss.

It could be possible for you to enter into an option agreement, whereby for a consideration an agreement is registered on the property giving you the first option to purchase the property when he is ready to sell. We always recommend you should seek independent legal advice about your situation.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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