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Care Needed With Mortgage Rescue Firms

Feb 5, 2008
Home owners who are struggling to keep up with their mortgage repayments are being hounded by so-called "mortgage rescue firms" who promise to save potential evictees from home repossession.

The cost of borrowing has increased considerably over the past year due to rising interest rates. Previously low mortgage repayments have increased significantly for some home owners, particularly if their mortgage contains a variable interest rate or a discount rate period that has expired.

The increase in monthly mortgage repayments has lead to a rapid rise in mortgage arrears and possession orders. Home owners who are facing repossession and eviction have become easy targets for mortgage rescue firms who promise to stop the repossession process and help the home owners to stay on their properties as tenants.

Mortgage rescue firms come in various forms - from large, national firms to small companies operating as sole traders in local areas. The mortgage rescue firm will typically offer the distressed home owner a heavily discounted price for their property and allow them to remain in the property as a rent paying tenant.

The amount of money offered for the properties varies considerably. It will usually depend on how much money the distressed home owner owes on their mortgage balance plus any arrears that have accumulated. This amount can sometimes be less than half the value of the property on the open market.

While this may seem unreasonable, the point of the exercise is to rescue the property owner from repossession and many years of financial hardship. For many individuals, this offer is attractive enough to accept, despite the fact they will lose thousands of pounds of equity in their home.

Normally, the mortgage rescue firm will allow the occupant to remain in the property as a rent paying tenant. Unfortunately for many people who accept the offer, they fail to realize that they have no legal recourse to remain in the property long-term. Instead, they will become a rent paying tenant on an assured short hold tenancy agreement, and when the term expires they can be evicted.

This is the part of the deal that property owners who are in financial distress need to be aware of. While the repossession process may be stopped and the home owner is allowed to remain in the property for a short time, the mortgage rescue firm has no obligation to allow the tenant to remain in the property over the long term.

Home owners who sell their properties to mortgage rescue firms should therefore attempt to negotiate a long term lease in if they wish to obtain any form of security regarding remaining as a tenant in the property.

Instead of contacting a rescue firm in the first instance, home owners who are struggling to keep up with their mortgage repayments should first attempt to find a solution with their current lender. If they fail to find a solution the home owner should then try to remortgage their property with another lender provided they can afford to keep up with the repayments. By remortgaging the individual will be able to remain in their property and may not be forced to sell it.
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