January 08, 2019
Shared appreciation, or equity sharing, allows you to get paid today for the equity you’ve accumulated in your property—without getting a loan. In exchange, an investor gets a share of your home’s future appreciation (or depreciation). As NerdWallet explains, you’re “allowing a silent partner to take a stake in your home.”
However, equity sharing doesn’t make sense for every homeowner. Determine your current financial situation and goals and compare them to these common scenarios for when it does—and doesn’t—make sense to enter a shared appreciation agreement.
If you’re short on liquid money, you can fund your financial need via equity sharing. For example, you can use a shared equity investment to pay off your credit card debt, particularly cards with high interest. It’s also a smart way to fund your education since, unlike private education loans, a shared equity investment has no interest.
If you don’t want to or can’t afford additional monthly payments or interest, you’ll want to take a closer look at equity sharing. Shared equity products have no interest or monthly payments because they are an investment. As such, you’re not obligated to pay off the capital from the investment until the end of the term.
If you know you want to stay put, you may not want to enter a shared equity agreement. Most shared equity products, including Hometap, have a term of 10 years, meaning you’ll need to repay the amount invested in your home when the term is up or sell your home.
If you don’t have enough equity in your home, you won’t be able to enter a shared equity agreement. According to NerdWallet, homeowners typically have half their home paid for prior to entering an equity sharing agreement. Calculate your home equity to see where you stand.
If you’re a debt-averse homeowner that needs liquid cash or is having trouble with monthly mortgage payments, you may benefit from an equity sharing product like Hometap.
As an investor, not a lender, Hometap makes an investment in your home now. You get cash to help fund your financial goals or needs—without having to sell your home, use up your savings, add yet another monthly payment, or implement draconian lifestyle changes.
*Hometap Note: The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.
VP, Business Development
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