A few weeks ago I received a flyer in the mail from a company that offered a new type of equity loan. The loans are for up to $50-100k I believe. They collect 0 interest and require 0 monthly payments from the borrower. Then, when you sell your house, they take the money back, plus a fee based on the % increase in your home value since the loan was issued. If your home has lost value, they claim they will suffer that loss with you and you owe them even less than your borrowed in the first place. On top of that, they pay in as little as 14 days. I chuckled and threw it in the trash. Too good to be true. But now curiosity has set in and I'm trying to find out more. Has anyone heard of this company or this type of loan?
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Account Closed:
Too good to be true. But now curiosity has set in and I'm trying to find out more. Has anyone heard of this company or this type of loan?
"Too good to be true" my rear end. Offering it as a HELOC is new to me, but equity harvesting mortgages have been around a couple years, at least in the Bay Area. I refuse to offer them. Every single time I run numbers, it screws the borrower, and that's true if I'm using conservative or liberal appreciation estimates. Worse even than reverse mortgages.
If you believe you are in a depreciating market, it would likely make sense. But then my question is... why are you buying real estate in a depreciating market?
I have a conjecture that equity harvesting schemes are more likely to be offered in strong appreciation markets, but since I only see Bay Area and SoCal stuff and not Ohio and Nebraska stuff, I wouldn't have any way to validate or refute that hypothesis.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Account Closed:
Too good to be true. But now curiosity has set in and I'm trying to find out more. Has anyone heard of this company or this type of loan?
"Too good to be true" my rear end. Offering it as a HELOC is new to me, but equity harvesting mortgages have been around a couple years, at least in the Bay Area. I refuse to offer them. Every single time I run numbers, it screws the borrower, and that's true if I'm using conservative or liberal appreciation estimates. Worse even than reverse mortgages.
If you believe you are in a depreciating market, it would likely make sense. But then my question is... why are you buying real estate in a depreciating market?
I have a conjecture that equity harvesting schemes are more likely to be offered in strong appreciation markets, but since I only see Bay Area and SoCal stuff and not Ohio and Nebraska stuff, I wouldn't have any way to validate or refute that hypothesis.
I'm just a guy looking to use the equity in my home. Can you explain why this would be a bad idea compared to a standard HELOC? I live in an appreciation market for sure.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Account Closed:
I'm just a guy looking to use the equity in my home. Can you explain why this would be a bad idea compared to a standard HELOC? I live in an appreciation market for sure.
Post all details on the numbers they are offering, including their equity harvesting math, and we'll run it. Include how much you believe your home will appreciate on average on an annual basis in the next 10 years. I'll compare to a really crummy HELOC, and we'll see how this compares to a really crummy HELOC.
Ok thanks. I'd appreicate an expert analysis. I wish I still had the flyer. Maybe someone who sees this will know the company name. It seemed like one of those lending club/prosper/sofi type companies, only much more specialized, with just this one type of loan available.
I found this similar company that offers almost the exact same type of loan. I can't use them, since they are not in my area, but maybe you guys could take a look and let us know if there's anything to be skeptical about?