In a sale-leaseback plan, an investor buys the home (at a price from 15 - 25 percent below the market value) and immediately leases it back to the former owner for life. The new owner assumes taxes, insurance, major repairs and other expenses usually associated with home ownership. Payment to the seller usually consists of a lump- sum down payment plus monthly payments. Rental is negotiable. A contract spells out in detail the rights and obligations of both parties. Sale-leaseback contracts also contain complicated clauses specifying, for example, what will happen in the event of the original owner’s death.
Deferred-payment loans are made to a homeowner for a specific purpose, such as modernizing, repairing or weatherizing the house. They usually carry low interest rates and repayment is not due until the owner dies or the house is sold. A number of variations on deferred payment loans have been described that do not offer cash hut charge off certain expenses as a lien against the property.
Home-equity conversion plans have a great deal of potential for benefiting older homeowners. On the other hand, they are highly complex and contain potential hazards. Because they are both new and complicated, they are not thoroughly understood by many financial, legal and real estate professionals.
