Higher interest rates have created a sudden increase for those with flexible rate. When a budget is already tight, this can make it very difficult to maintain payments and stop repossession. Lenders are also pressured because of the high number of defaults and the cost of carrying loans that are delinquent.

Rent back house is a term often heard in discussions revolving around stopping home repossessions. Many aren't sure exactly what this means. Rent back house is another way of describing a fix allowing the owner, who is defaulting on the mortgage, to continue living in the house by paying rent. Some offer options allowing them to sell and buy back the home or participate in rent-to-own programs.

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.

The problem here is that unlike the payments on a fixed-rate mortgage, rent does not have to stay constant over the long term. The landlord can raise rents sharply, or sell the property to someone else who may either greatly increase rents or stop renting out the property, forcing tenants to leave. While the latter scenario isn't very likely because tenants who stay on the property are a steady stream of income, the uncertainty remains and is an inherent part of renting property.

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 situation? The flexible rates were issued when home loan interest was very low, and special low "starter" rates were offered allowing many to qualify for loans that otherwise could not. But their budgets were only adequate for the starter interest rates and when interest rose sharply, the new payments were beyond their means. This left them with few choices other than a "quick sale" or a rent back house plan, maybe with repurchase rights, to fend off repossession.