While it is no secret that the U.S., and to some extent the UK are now in the middle of a mortgage meltdown of epic proportions due largely in part to the lagging economy colliding with the once attractive and flexible mortgage rates that are now coming back to haunt those who took advantage of it at the peak of the market.

With people's mortgage payments increased due to higher interest on their own flexible rates, many people with tight budgets are struggling to stop repossession. Many people are defaulting, so the lenders are becoming strapped and are less likely to carry any delinquent loans.

Perhaps you've recently heard the phrase "rent back house" and wondered just what exactly it means. Basically a "rent back house" is a solution that allows a defaulting mortgage holder to remain in their home by renting it. There are some companies that allow these homeowners to sell and buy back their homes. Other options may include renting to own. These are good options to consider if you are facing a home repossession.

When wanting to withstand increasing mortgage rates a "rent back house"is a very helpful scheme.A company who purchases will oftentimes offer to charge a lower leasing rate which helps ease the pinch of higher costs for its seller.The seller does not have to move out of his house while hedging a fortress against higher interest rates on his mortgage.Moving out of his house would have caused additional expenditures.

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.

You should be aware that quick sale buyers and rent back providers will typically pay below actual market prices, but you will buy it back at the full price. This still can be a good scheme for homeowners to buy again once they are more financially secure. Of course, flexible rates are still risky. But one good thing is that if property prices continue to go up in the near term, you will be able to buy the house at today's price or possibly even lower.

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

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.