Sell and Rent Back Strategy: Does it Work

Common in the UK, a sell and rent back (also known as a sale and rent back) is when you sell your house and rent it from the new landlord. This allows you to free up cash and potentially avoid foreclosure while still residing in your house, even if you are in mortgage arrears.

Below, we'll list the pros and cons of a strategy like this.

The big advantage of a sell and rent back is that, given a willing buyer, you will not have to move – at least in the short 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 actually 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.

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.

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.

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.