Home Equity Contract
A home equity contract is an agreement between a homeowner and an investor, in which a homeowner receives instant cash in exchange for equity in the home.[1] Because a home is often a consumer’s most valuable asset, homeowners can use their home’s equity for debt reduction, renovation, credit repair, and anything else from funding a start-up to paying for education.[2]
Differences from home equity line of credit[edit]
Home Equity Contracts are a form of non-debt financing for equity rich homeowners.[citation needed] The Homeowner continues to own the majority of the home, agreeing to settle the contract at any point before the expiration of the contract term.
Originators underwrite the home, using robust standards that allow for risk mitigation.
Differences from reverse mortgage[edit]
Unlike reverse mortgages, Home Equity Contracts do not charge interest, utilizing equity participation in lieu of mortgage debt.[2] There is also no age requirement.
References[edit]
- ↑ Olick, Diana (2019-04-05). "Need cash? Now you can sell the equity in your home to investors". CNBC. Retrieved 2021-01-04.
- ↑ 2.0 2.1 "Home Equity Contracts" (PDF). Kingsbridge Alternative Strategies Fund. Unknown parameter
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