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It is well known that the United States and the United Kingdom are experiencing a mortgage crisis. A slower economy has met with the once attractive flexible rate mortgage and cause great difficulties. Home owners are now faced with drastically rising rates.

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.

Here's a new strategy to stave off home repossessions. Its called "rent back house" and is an interesting ploy. The concept of "rent back house" means exactly what it seems; the person who holds the mortgage (and is defaulting on it) gets to stay in their home by becoming an tenant instead of an owner. Folks in this situation may even be able to sell and buy back their houses. Other choices include renting to own and similar ploys.

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 is that the rent is not permanent as a fixed rate mortgage would be, and when the term expires, the amount can rise considerably. In fact, the new owner can always sell the property again and the person who takes ownership may want more rent or even want to occupy the property and require the tenants to leave. This scenario is possible but in reality is highly unlikely because investor buys the property to keep it long term and wants to keep the tenant there for as long as possible. But uncertainty clearly remains.

A buy back option can protect you from this uncertainty. Under this type of setup, the house can't be sold under you for a specified period of time, usually between two and five years. Some companies may even guarantee that you can exercise your option at the current market price if you buy back during that time period. It is definitely to your advantage if you can negotiate for this option.

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. For the people who fell in that category, the option to rent back and then buy back the same house without having to move out could save them from unnecessary upheaval and heartache.

In both the US and UK, the mortgage industry is a mess. As the market has fallen, once-attractive flexible-rate mortgages have increased the payments of homeowners dramatically. To help people stop repossession they either sell and buy back their own homes, usually financially disastrous, or they turn their family home into a rent back house. This means that the bank buys the house back, but instead of evicting the occupants, they charge them rent. The rent is usually less than the payment would have been, but this is also not fixed and usually much higher than the market.