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A buy-back option gives you the right
to buy back your property in the future.
We normally set the option to run between 2 and 5 years, but you may have
different requirements. The 2
year lower time limit is so that we can get a competitive Mortgage that
may have a 2 year early redemption
penalty.
A typical option would have a repurchase price on the property of 15%
above the price that we pay.
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Consider as an example a property worth £140,000.
You decide to sell us your house for £100,000. In this example this is
enough money to clear your mortgage
and debts.
Suppose that you exercise your option after 5 years and that house prices
have gone up on average by 5%
per year.
Your property now has a market value of £175,000, but you still have the
right to buy the property at
£115,000.
Although in theory you lost £40,000 of equity when you sold below market
value, in this case when you buy
your property back, you have recovered your lost equity and acquired an
additional £20,000.
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If the property market crashes, then you are not obliged to buy the
property back.
Remember the cheaper you sell the property to us, the less rent that you
will pay and the cheaper your
property will be to buy back. |
