A home equity investment is an increasingly popular financial product available to homeowners. This relatively new product is offered by several companies and has pros and cons associated with it that consumers should understand.
A home equity investment allows homeowners to tap into the home equity that has been built up in exchange for a minor ownership stake in the property.
The investment company then participates in the increase or decrease in the value of the property over time. There are no monthly mortgage payments but homeowners are still responsible for paying property taxes, insurance, and maintenance.
The repayment of the loan is deferred until the homeowner sells the home or at the end of the duration of the investment term.
To qualify for a home equity investment you must own a home and have enough equity built up in your home. It is ideal for homeowners who want to tap into the equity built up.
If a consumer qualifies an investment company will give a portion of that built up equity (typically 5% to 20% of your home’s current value) in exchange of a stake of the future appreciation (or loss of value) in your home.
This type of product is ideal for homeowners who may not qualify for a HELOC or home equity loan due to credit or if they’re not yet 62 years old to do a reverse mortgage loan.
There are several considerations to make before deciding to proceed with a home equity investment. As with any large decision, it’s helpful to have an understanding of the pros and cons associated. Some of them include:
The process of getting a home equity investment is fairly straightforward and typically entails the following steps:
Please note that not all home equity investment companies have the same process. Some may have more or fewer steps depending upon their process. Please inquire with the investment companies at the start of the discussion to outline their own process to properly set expectations.
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