Home Equity Alternative: Sharing home’s value?

2 Replies

I'm researching various company options for HELOCs, and came across https://www.patchhomes.com/faq

Here are a few highlights:

We offer a debt free alternative to home equity loans and HELOCs. Our financing contracts are an easy way to cash out your home equity at 0% interest with no monthly payments. In exchange, we share in the future upside or downside of your home’s value.

We are able to offer 0% financing, since in exchange for interest free financing, we receive a percentage of the future home value appreciation. We rely on the future increase of your home value in order to generate a return for our offering.

Generally, our customers will access around 10% to 15% of their home’s value as funds through our solution. We will offer funds upto a maximum of 75% lien to value (LTV) or $150,000.

The initial estimate is free and has no commitments tied to it. Once you complete the final application, we charge a one-time servicing fee of 3% of the requested financing amount before transferring the funds.

In addition to the servicing fees, you are also responsible for the title/escrow charges and home appraisal fees. These are generally around $400 each respectively.

Does this sound like a good HELOC/Equity Loan alternative?

@Eddie Starr this seems pretty reasonable. I think you can find HELOCs that will lend a higher LTV for your home though. So if the 0% rate thing is ok to sacrifice for a higher LTV then seek out some different options just for comparison.

I do want to mention that two of the common areas of concern for HELOCs I see out there is the 10 year maturity date and the adjustable rate. Since HELOCs have adjustable rates they will often catch people off guard when they adjust. With rates moving higher, it is likely that your rate will increase in the future. The 10 year maturity date is where the HELOC will modify into a different product all together. Meaning after opening the HELOC for 10 years it will cease to be a HELOC. It will "mature" into a 20 year fixed rate mortgage that you can no longer draw on. And when is matures the rate will increase. I've seen typical numbers of 1%-2% higher than your current rate.

If you are using a HELOC as part of your strategy just make sure you have a plant to pay it back. Good luck!

@Eddie Starr the devil will be in the details for this. I have seen something similar before. I decided it wasn't a good idea because I looked at how much they would take of the profits if I chose to sell in 6 years. it is all situational.