Equity Sharing Concept Begins To Expand
June 25th, 2008
Related Stories
- Is This A Shrewd Reverse Mortgage Strategy?
- EquityKey and Shared Risk
- Are Two Reverse Mortgages Better Than One?
- If Not A Reverse Mortgage, Perhaps Appreciation Sharing
- Jumbo Reverse Mortgages Slip-Sliding Away
Story Tools
Reuters has an interesting story about the REX program, an equity-sharing arrangement which is an alternative to a reverse mortgage.
According to Tapping home equity for no-debt cash, the REX approach worked like this for one couple: “It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house. At that time, they’ll owe Rex & Co. the $117,000 plus half of the appreciation in their home’s worth between the time they signed the agreement and the time they sell the house. If the house goes down in value, Rex & Co. will eat half of that loss as well.”
The suspicion here is that we will see more equity sharing programs such as REX and EquityKey — but only if home values again begin to rise.
To make equity-sharing work the lender must be able to make a profit. With an equity-sharing arrangement where the lender advances money against an interest in future appreciation there must, in fact, be future appreciation.
One could argue that lenders should make equity-sharing deals when home values are down because they could capture additional appreciation as prices rise. The big assumption here is that prices will actually increase.
The problem is that there is risk in the marketplace. Consider that the Nikkei — a measure of 225 leading Japanese stocks — stood at 13,743.85 yesterday. On December 29, 1989 the Nikkei reached 38,915.
For the full Reuters story, see: Tapping home equity for no-debt cash
Related Resources You May Like
RSS Feed
