If you’ve fallen behind on your mortgage, you’re probably frantically looking for solutions. You may have heard of one strategy that’s unconventional in nature, but happens to have a nice potential payoff if successfully executed. The sell and rent back strategy (often deployed in Fantastic Britian) allows you to sell your home, only to quickly turn around and rent it back.
This article will take a closer look at the strategy to determine its effectiveness.
The huge advantage of a sell and rent back is that, given a willing buyer, you will not have to go – at least in the small term. As part of the sale agreement, the buyer gives you not only money, but also a rental agreement. This sell and rent transaction is really two transactions rolled into one.
Another advantage of a sell and rent back is that any debt on the house is transferred typically to the new owner. If the house is in mortgage arrears the lender may be willing to work out a payment schedule with the new owner instead of you, which means that you may avoid repossession.
The disadvantages of a sell and rent back are probably minor compared to the risks run by bankruptcy, repossession, and of course, eviction. When you rent back property ideally you avoid all of those pratfalls.
But, you should realize that the sell and rent back scheme is going to necessarily mean that you will get less than market value for your home, as this quick sale instead provides you the benefits above.
You will still be responsible to meet your monthly rental payments, which could exceed the cost of your previous mortgage, depending upon how paid down your mortgage was. Additionally, your rental agreement will consist of a term that may require you to go out after it expires.
All in all, the benefits generally outweigh the cons considering the risks of not acting on a situation that’s forcing you to miss your monthly home payments. This is a strategy that should certainly be considered if possible.