Reverse Mortgage Guide

EquityKey is offering a shared equity program for seniors in New York, New Jersey and Connecticut.

The nub of the arrangement is this:

“The EquityKey Real Estate Option gives property owners the opportunity to receive typically 10 to 15 percent of the assessed value of their property as an upfront cash payment in return for selling 50 percent of its future appreciation to EquityKey. The sale of this Real Estate Option does not dilute the owner’s current equity. Unlike a reverse mortgage or other home equity debt product, the EquityKey payment does not accrue interest and does not need to be repaid as long as the homeowner abides by the EquityKey option agreement.”

Since existing equity is untouched by this approach, I had a thought….

Could someone have both a reverse mortgage and an equity-sharing arrangement?

In commercial real estate and with mortgage securities it is not unusual to sell of portions of the income stream. And, of course, many homes have first and second mortgages. Why not have the same concept with senior homes?

Example, Smith has a $750,000 home and gets a $250,000 reverse mortgage. In addition, Smith gets a $112,500 shared equity loan (15 percent of the property’s current value) in exchange for a half interest in the future appreciation of the property.

For borrowers the result would be a significant cash increase. But would there be enough equity for lenders?

As is always the case with reverse mortgage products, borrowers should review their options and speak with an independent counselor such as an attorney who specializes in elder law before signing any paperwork.

This entry was posted on Friday, June 20th, 2008 at 5:28 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.