If Not A Reverse Mortgage, Perhaps Appreciation Sharing
August 26th, 2008
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U.S. News & World Report has an article regarding the Equity Key program, a reverse mortgage alternative that we have looked at previously.
“EquityKey, says U.S. News, “a San Diego company that is a division of Belgium-based KBC Bank, will provide a cash advance on a house in exchange for the right to share in the home’s future appreciation. Single property owners ages 65 to 85 can receive 10 to 15 percent of the value of their property in exchange for a 50 percent stake in the home’s future value. Two homeowners can collect up to 30 percent of their home’s value, but then EquityKey receives 100 percent of the property’s appreciation. Clients keep their existing equity and don’t take on debt.”
The magazine shows how the program works:
“EquityKey cofounder Jeff Nash gives an example of a house worth $1 million,” explains the magazine: “The company will pay the property owner between $100,000 and $150,000 in cash to partner in the growth of the property. If that house grows to be worth $3 million in 20 years, $1 million of the appreciation will belong to EquityKey and the other $1 million to the owner. If the client passes away within 10 years of signing the agreement, EquityKey would use a life insurance policy it purchased on the homeowner to buy the home for $2 million. (The company can then sell the house for $3 million.) Should the heirs desire to keep it, EquityKey offers the right of first refusal to the family, Nash says. But they essentially would have to buy the $1 million share of the house EquityKey owns.”
The article mentions two other shared-appreciation providers, REX & Co. and Grander Financial. We’ve written about REX before but Grander is new to us.
As with all reverse mortgage programs and alternatives, get independent advice from family and friends as well as an attorney who specializes in elder law. Ask about up front fees and charges and the usual scenarios — what if you want to move, what if your heirs want to keep the house, etc.
For the full story, see: Tapping the Future Value of Your Home.
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