Rex & Co., a San Francisco based company has come up with a new financial product to help home owners take equity out of their house by agreeing to share a percentage of their future appreciation (or loss) when it’s time to sell. There are both supporters and critics of the program already and some solid arguments from both sides. There are no payments and no interest at the time you take your money. It’s not a loan, instead it’s an “equity co-share”–very interesting concept.
As reported at SFGate.com, here are some examples:
“Scenario 1: After five (or more) years, the homeowner sells the house for $900,000, a $150,000 increase in value. The homeowner pays Rex $75,000 (half of the appreciation) plus the original $100,000.
Scenario 2: After five years, the house sells for $675,000; it has lost $75,000 in equity. Rex “owns” half of that, or a negative $37,500. The homeowner pays Rex $63,500 — the original amount minus Rex’s loss.
Scenario 3: After five years, the home sells for $750,000. The homeowner pays Rex $100,000, its original investment; Rex has neither made nor lost money on the deal.
Scenario 4: The homeowner decides to sell after just 11 months. The house sells for $770,000. Rex is paid the original $100,000 plus $10,000 (half of the $20,000 appreciation) plus an early exit fee of $25,000 (25 percent of Rex’s initial investment) for a total of $135,000.”
It’s worth a read and we’d like to hear what you think.
A new way to tap equity without going into debt / Homeowners can sell a share of future appreciation [SFGate]
A new way to tap equity without going into dept[theFrontSteps]
Filed under: Ggold, finance, news, random , finance, news
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