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.

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.

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.

Naturally, there are disadvantages to this strategy too. But they’re minimal compared to the relief that a sell and rent back strategy might provide. They’re also far less consequential than a repo, bankruptcy, or foreclosure.

You’re also likely to get something far less than you’d normally get for a sale price, as your desperation to sell your home quickly will force you to accept a lower price.

You will still be responsible to meet your monthly rental payments, which could exceed the cost of your previous mortgage, depending upon how paid down your mortgage was. Additionally, your rental agreement will consist of a term that may require you to move out after it expires.

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.