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Best Home Equity Sharing Companies

May 2024

Home equity sharing is a good choice for those who can't qualify for traditional home equity financing or want to access their home equity without getting into debt. Check out our top-rated home equity sharing companies.
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A Comprehensive Guide to Home Equity Sharing

Home equity sharing, also known as shared equity finance, is a method of accessing the equity in your home without getting further into debt. It involves partnering with an investment company who will become a partial owner of your property in exchange for funding. In this guide, we will cover all you need to know about home equity sharing.

What is home equity sharing?

A home equity investment, or shared equity agreement, is a financial arrangement that allows homeowners or home buyers to share home equity in exchange for a lump sum payment from an investor. The investor will receive a share in the future value of the property when it is sold, or when the contract term ends. The homeowner does not need to make monthly payments or worry about interest rates. Instead, at the end of the contract, they will repay the investor's initial investment and a fixed percentage of the change in home value. Some agreements are based on the overall value of the property at sale. Home equity sharing agreements typically last 10 to 30 years, but the homeowner can buy out the investment at any time.
Shared equity appreciation agreements give investors a low-risk way to invest in real estate that can offer them tax benefits. A growing number of reputable firms are offering these products to consumers, often partnering with large institutional investors such as pension funds who are looking for investment exposure to real estate assets.

How home equity sharing affects homeownership

A shared equity finance agreement gives an investment company or investor a stake in your home's future equity. However, the investor will not have any say in the day-to-day running of your home. They cannot make decisions on how you decorate or what remodeling projects you take on. The investor will benefit if your home's value increases, and you will be responsible for any expenses, taxes, or insurance costs. When the equity sharing agreement contract ends, you will repay your investing partner the amount they initially loaned you, plus a percentage of the appreciation in your home's value. If your home decreases in value, the investor will receive less money.
It is essential to note that home equity sharing agreements are not technically mortgages, and you may qualify more easily for a shared equity agreement than a traditional home loan product. Credit and income requirements are typically more lenient.

Pros and cons of home equity sharing

Here is a list of the benefits and the drawbacks of home equity sharing agreements.
  • Allows homeowners to access their home equity without getting into further debt
  • No monthly payments or interest charges
  • If the property value drops, the homeowner will need to repay the investor less money
  • Can help pay off high-interest debt
  • The homeowner typically needs a minimum of 25% equity in their home
  • May encourage homeowners to spend more than they can afford on their house
  • Reduces the homeowner's profit when they sell their house if its value increases
  • The homeowner may need to sell the house to repay the investment

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