Three things you didn’t know about Residential Sale and Leaseback

POST WRITTEN BY

Saskia Wijngaard

Mortgage brokers who are currently offering HELOC loans, reverse mortgages and other equity extraction loans ought to consider throwing their hat in the ring with residential sale leaseback, the option also known as Sell ‘n STAY This real estate product is 5 years old in the marketplace provides mortgage brokers access to a wider customer base than previously afforded to them in asset-based lending. Residential sale and leaseback remains a relatively unknown entity, there is a lack of knowledge and understanding surrounding the product that could potentially hinder mortgage brokers’ sale attempts or make homeowners hesitate. Which is why Sell ‘N STAY Inc. is now providing free training to all mortgage brokers. It may also provide brokers with a product to offer homeowners who would previously have had no other equity extraction option.

The Sell’n STAY program allows mortgage brokers to offer customers a solution to their financial woes based solely on the equity they have built up in their home without having to leave it. It fills in many of the gaps left by traditional equity equation products and focuses on the assets accrued by the customer over the years. It’s another program brokers can add to the relatively limited arsenal currently available for asset-based lending.

Here are three things you may not have known about Sell’n STAY:

1. It provides an additional option for a broader customer base.

Reverse mortgages come with age restrictions. Home equity line of credit (HELOC) loans come with credit restrictions and typically unattractive interest rates for those with less-than-perfect credit. Mortgage brokers who only offer these equity extraction types wind up turning down untold numbers of potential customers who walk through their door due to restrictions. For the potential customer, the fact that they have adequate equity build up in their home doesn’t even have the chance to come into play. Residential sale leaseback provides a third option for customers restricted from traditional equity extraction products, provided the home equity exists.

2. There are no age restrictions, but it isn’t always the better choice over a reverse mortgage.

Homeowners don’t have to be of retirement age to have equity built up in their home that they’d like to have access to. However, the popular reverse mortgage program for seniors doesn’t offer equity extraction to people who haven’t made it to retirement age yet. Younger homeowners needing to access their home equity should ask their brokers about the option that doesn’t have any need to discriminate based on age, opening it up to far more homeowners.

Sell’n STAY won’t be the right choice for some customers who would have qualified for a reverse mortgage. At the end of a reverse mortgage term, assuming the loan payments have all been made, the home is still the property of the homeowner — which isn’t the case with residential sale and leaseback. Customers who would like their home to stay in the family will likely not be good candidates for the new product. However, for customers to whom a stable place to live is the most important factor, this additional option can give brokers with a way to provide homeowners with that — and their equity, too.

3. It offers an option for low-credit customers.

It’s never ideal to have to turn a customer down, and it’s even worse when they have plenty of equity but have fallen on hard times. Often, the people who need access to their equity the most are people who are in trouble. When people get into financial trouble, their credit score often suffers, whether it’s from missed payments, high credit utilization ratio or just a general lack of revolving credit because they simply can’t afford anything extra.

Saying no to low-credit customers seeking a HELOC is hard, especially when they have perfectly adequate assets that they just can’t get to without leaving their home. Sell and stay does provide an option to these customers, but it’s not without its own strings attached. Debt challenged Sell ‘n Stay Clients may be required to provide a 6, 12 or 18 month voluntary rental payment out of the equity they get from the home sale — which may not be an option if the equity is needed to settle other outstanding debts — so brokers are still required to gather credit info similar to how they would with other loan types.

Of course, not every customer is willing to resort to selling their home, but with the lease conditions offered with sell and stay combined with fewer restrictions, it provides another equity release option that brokers would be wise to add to their arsenal. It comes with all the benefits of other equity extraction loans but removes many of the obstacles that can prevent potential customers approved. So long as they have substantial equity and a desire to stay in their home, this product should be an option for customers who don’t mind handing over the title.

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