Many people with the inability to meet their monthly mortgage obligations consider the sell and rent back strategy. More so used in England than in the US, this strategy may be the solution to avoiding a repossession of your house and may help out homeowners with liquidity, giving them an instant boost as far as their cash flow is concerned.
Is it a good idea to sell your house and rent it back? Let’s take a look.
Many homeowners become emotionally attached to their residence, doing whatever they can to avoid leaving it. The sell and rent back strategy keeps this sense of home intact, as the buyer of your home will agree that upon buying your house, he’ll immediately rent it back to you. The terms will be pre-negotiated, all contingent on the sale of the home.
Additionally, the buyer of your home will be fully responsible for any existing debt that you may own on your mortgage. The bank that handles your mortgage will be responsible for working out a payment plan to satisfy any back pay owed on your mortgage, relieving you of what may be months of unpaid mortgage payments.
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.
However, 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.
Also, bear in mind that this rent back home part of a sell and rent back means that you are a renter, and when your rent agreement runs out, you need to renew it or find a new place to live.
In sum, a sell and rent back can be an effective way to gain liquidity quickly while staying in your home.
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