It's hardly a secret that the United States, and to some extent United Kingdom, is now in the middle of a mortgage crisis of epic proportions. A lagging economy has met disastrously with the once attractive flexible rate mortgage rates coming back to hit home owners hard..


With mortgage payments suddenly greatly increased due to higher interest on those flexible rates, and with many already having budgets as tight as they could get, many are now struggling just to stop repossession. With so many defaults, lenders are also strapped and less likely to able to carry delinquent loans..

Perhaps you've recently heard the phrase "rent back house" and wondered just what exactly it means. Basically a "rent back house" is a solution that allows a defaulting mortgage holder to remain in their home by renting it. There are some companies that allow these homeowners to sell and buy back their homes. Other options may include renting to own. These are good options to consider if you are facing a home repossession.

The company who buys the home in a "rent back house" scheme will usually offer to charge a rent that is much less than the current mortgage payment which eases the crises for the homeowner. The seller need not move out of the house, which is of course yet another expense, and has a lease that fixes a housing cost for a period of time instead of the worry of what the next mortgage interest rate increase might be.

A fixed-rate mortgage creates a much more dependable housing situation than renting. For instance, when you're renting and the term of your lease expires, the only way you may get to stay is by signing a new contract with much heftier rent payments. Also, in a rental situation, you always have that outside chance your landlord could decide to sell the property landing you out on the street. Admittedly, this doesn't happen often, because your landlord wants to keep you as a tenant, but it is a thought you have to live with. The bottom line is that there are insecurities as long as you don't own the property where you live. However a buy back option can prevent this uncertainty. This simply means that the house can not be sold under you for a specified period of time, often two to five years. And if you research companies, some even guarantee that you can exercise your option at current market price (that is the price of the property today, or even lower) if you buy back during that time. You may want to negotiate for this option if at all possible.

You should be aware that quick sale buyers and rent back providers will typically pay below actual market prices, but you will buy it back at the full price. This still can be a good scheme for homeowners to buy again once they are more financially secure. Of course, flexible rates are still risky. But one good thing is that if property prices continue to go up in the near term, you will be able to buy the house at today's price or possibly even lower. How did so many get in this situation? The flexible rates were issued when home loan interest was very low, and special low "starter" rates were offered allowing many to qualify for loans that otherwise could not. But their budgets were only adequate for the starter interest rates and when interest rose sharply, the new payments were beyond their means. This left them with few choices other than a "quick sale" or a rent back house plan, maybe with repurchase rights, to fend off repossession. For those who fall in that category, an option to rent back and then buy back the same house without having to move out could save them from unnecessary upheaval.