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 Great Britian) allows you to sell your home, only to quickly turn around and rent it back.
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.
There are a few disadvantages to a sell and rent back strategy, but these generally pale in comparison to the benefits of one. First of all, you’ll now be responsible for paying your monthly rent to the new owner of your home.
It also becomes more difficult to sell your home for the price you’ve had in mind, since you’re basically working within a very limited timeframe.
Failure to do so will have the same ramifications on your credit that missing a mortgage payment did. You’ll also be signing a rental lease that eventually winds down, meaning that your time spent in your existing home may be limited.
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 definitely be considered if possible.