Rent Back House Method Prevents The Bank From Getting Your House

Many advertisements with phrases like “sell and buy back” and “rent back house” are quite common these days. You might also have come across similar advertisements with headlines “houses for rent back” or something like “rent back” even on the internet while browsing. Because of the mortgage crunch such advertisements are quite common and it is a major concern for those who are in trouble with mortgages.

Years ago, low interest rates or so called “teaser” rates offering low payments gave people the opportunity to buy a home with a payment they could handle. As time passed however, interest rates went up – and those with a variable interest rate found their payments skyrocketing. The thought at the time was that incomes would rise with the interest rate – and those new home owners would be able to afford the bigger monthly mortgage.

Regrettably, salaries haven’t kept up with interest rates and not everyone has gotten raises that are sufficient to pay the additional monthly mortgage fees, which results in past due payments and ultimately the risks of repossession or foreclosure. A rent back house is a home that is sold to a firm but the firm agrees to allow the seller to rent the home back in order that the family isn’t forced to move, and could possibly purchase the home back in the future.

To make budgeting easier it is often the case in rent back house scenario that you will have a guaranteed rental rate. Initial rents will tend to be lower, so as to help the seller right the financial ship, making it more likely that they will keep up with rent. There are also often provisions in the contract which prevent the house from being sold to a third party for a guaranteed period of time, giving the original owners the chance of getting a new mortgage and getting their house back.

Anyone confronted with repossession or foreclosure should consider the drawbacks. There are never any guarantees that owners will be able to re-qualify to buy the home or that the rent will be affordable. Most people feel that selling the house to rent back is a superior alternative to losing the house to the bank and needing to move. It’s advisable to get an independent opinion from your accountant, lawyer or some other financial advisor not attached to the rent back house company.

You may have to pay a deposit when renting this way like any other rental and will usually pay the market value for rent. How long the rate is guaranteed and whether buy back is an option and for how long varies from agreement to agreement. So be very sure of terms before you sign anything and if at all possible shop around for the best terms. Try not to wait until such time when bailiffs are about to turn up to take possession of the house. Many good companies can still stop the repossession and save the house for you, but it is better to start early. Because the overall process of selling the house to rent back can take several weeks. The internet is a great tool for locating companies who specialize in these sales.

Recent real estate ads frequently contain phrasing such as “sell and buy back“, “houses for rent back“, and “rent back house.” These types of ads are also prevalent online, where “houses for rent back” or similar phrasings relating to “rent back” appear in the advertisement titles. The reason these ads are so much more common now than before is the mortgage crisis, which is a very real problem for those homeowners having difficulty writing their monthly mortgage payment checks on time. It’s advisable to get an independent opinion from your accountant, lawyer or some other financial advisor not attached to the sell and rent back company.

- Peter Shukla

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