If you’re faced with a struggle to pay your debts, particularly your mortgage, selling your property and renting it back may be an option that would help you eliminate the risk of losing your home. A sale-and-rent-back set up is where you sell your home at a discounted price and stay living there as a rent-paying tenant for a given (fixed term) duration. Although this may let you sort your financial worries, selling your property and renting it back may pose a few risks for you.

You’ll lose ownership of your home – something that you have worked hard for.

The new owner may increase your rent either during or after the term of your tenancy.

You may still have to leave after the tenancy agreement.

There’s a chance of eviction if the rules of the tenancy agreement are broken – particularly when rents are behind.

If the new owner gets in trouble with their finance, their lender could repossess the property and you’d be forced to leave.

As the set up involves selling the property at a discount, you’re very likely to get less money than selling it on the open market.

Your eligibility to file for bankruptcy or insolvency may be affected by the discounted price sale.

If this is not a desperate time yet for you, you might want to consider your other options. Perhaps speaking with your mortgage lender may help you with a repayment arrangement for your debt in arrears.

You can also seek the help of a debt adviser who may deal with your mortgage lenders. You might have other creditors who can help you with consolidating the debt you owe and manage them so you can keep your property. And if you can get help from the government, including claiming benefits, go ahead and make enquiries as soon as possible.

You can also put the property on the open market and rent somewhere else. A local estate agent can help you with the sale prices in the area and find a place for you to rent.

However, if desperate times are calling for this desperate measure, make sure that you can afford such set up and learn everything about the agreement so you won’t feel robbed in the end.

There are firms that specialise in sale-and-rent-back schemes who can work with you on this plan but see to it that they are regulated by the Financial Conduct Authority. This ensures that the advice they give you is in accordance with compliance regulations. Should you receive wrong advice, you can complain to the Financial Ombudsman Service.

Once you have understood the terms of the scheme, you should receive a document of the terms called Key Facts Illustration which you can use to compare various forms of sale-and-rent-back schemes from different companies.

It is also very important to know how this set-up affects your benefits including your Housing Benefit from the government. You’ll be best getting advice from the welfare benefits office or the Citizens Advice.

Once the set-up is sorted, read and understand the terms of your tenancies to make sure you avoid being forced out of the house sooner than you’re expecting. The usual duration for this set-up is at least five years.

Generally, you have 14 days to consider an offer to buy your home before they can get in touch with you again to follow-up or make another offer.

Should things go wrong and something unfavourable happened that could have breached the terms of agreement, complain to the firm/buyer and see how you can resolve the situation. If push comes to shove, you can bring the issue up to the Financial Ombudsman Service.

While you reckon selling your property and renting it back is an plausible move to resolve your financial and housing difficulty at the moment, consider it only as a last option. Make sure you’ve considered the alternatives just to avoid getting in a possibly deeper trouble.