You might be aware of advertisements that say things like “sell and buy back” and “rent back house”. You may have also seen ads in the internet for “houses for rent back” or similar ones with “rent back” in their titles. They appeared as an answer to the mortgage crunch that is currently talked about everywhere in the news, and that is such a concern to those in trouble with a mortgage.
A number of years ago when interest rates were lower or companies were attracting buyers with low-payment “teaser” rates, many people found it possible to buy a home. The low payments they got at the time were at the top range of what they could afford. When payments or interest rates increased, they could not manage the new higher monthly payments unless their incomes had also risen as they were supposed to in theory.
Unfortunately, wages have not kept pace with interest rates and not all workers have gotten raises that are high enough to pay the new mortgage monthly charges, resulting in late payments and eventually the threat of repossession or foreclosure. A rent back house is one that is sold to a company but the company allows the seller to rent it back so that the family does not have to move, and can possibly buy it back at a later stage.
To make budgeting easier, some rent back house agreements have a guaranteed rental rate for a set period of time. Seeking to improve the likelihood of staying current on rent, the initial rent amount is lower to help the seller get his or her financial house in order. The agreements also may aim to facilitate the original owners can get a new mortgage to buy back the house by having a provision to prohibit the resale of the house to a third party for a set time period.
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.
Like any other rental, you may have to pay a deposit when you rent this way and your rent will most likely be close to market value. The length of time the rate is guaranteed, the availability of a buy back option, and the rental period will vary according to the agreement. Shop around for the best terms, and make sure you understand all terms before signing anything. Do not wait until bailiffs are trying to take possession of the house. It is best to start early, as many good companies can stop repossession and save the house. Remember, selling the house to rent back can take several weeks. You might consider using the internet to find companies that specialize in this type of sale.
Recent real estate ads frequently contain phrasing such as “sell and buy 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 houses for rent backpany.
- Peter Shukla
This entry was posted on Thursday, October 29th, 2009 at 1:10 pm and is filed under Finance, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
