Flexible rate loans are readjusting to higher rates resulting in higher loan payments. This unwelcome burden for those already on tight budgets is the source of great concern, as many must now fight to stop repossession. Lenders are also under pressure from the increase in default loans making them less able to hold onto delinquent loans.

You may have heard the phrase "rent back house" in connection with discussions on stopping home repossessions and wondered what it means. Basically, this quick term, "rent back house," is shorthand for a solution that allows a defaulting mortgage holder to at least stay in their home by renting it. Some companies also allow them to sell and buy back their homes or even have a rent to own scheme or other options.

The company who buys the home in a "rent back house" scheme will usually offer to charge a rent that is much less than the current mortgage payment which eases the crises for the homeowner. The seller need not move out of the house, which is of course yet another expense, and has a lease that fixes a housing cost for a period of time instead of the worry of what the next mortgage interest rate increase might be.

One drawback is that rent is not permanent, as opposed to a fixed rate mortgage. So it's possible that the amount can increase when the term expires. And the new owner can resell the property to someone else who may increase the rent or want to reside in the property themselves. It's an unlikely scenario, since investors want to buy the property for the long term and retain their tenants. Still though, it is a possibility and a risk you should be aware of.

A buy back option, that ensures that the house cannot be sold from under you for at least two years, will eliminate this uncertainty. Some companies will allow you to exercise your option at the house's current market price or less if you buy it back during that period. If at all possible, you need to make an effort to have a buy back option included in your contract.

Be aware that quick sale buyers and rent back providers will generally pay a price that is substantially below the actual market price, but you will buy back at the full price. Still, once past the current financial crunch, these schemes may allow homeowners turned renters or tenants to buy again. It goes without saying that flexible rates would present the same risks again. In fact, if property prices go up in the next few years then buying back the house at today's price (or even lower) is an attractive option.

How did so many get in this home crunch situation? The flexible rates were handed out like candy when home loan interest was very low. These special low "starter" rates were given allowing too many people to qualify for loans that they could not afford. Having budgets that were only good enough for starter rates so when interest shot through the roof, the new payments were unreachable for them. This left them with very few choices. Sure maybe a quick sale or rent back house plan with possible repurchase rights as not to face repossession.