Hi. This is Tom Heath with a Mortgage Guidance Group at Nova Home Loans and this is our weekly installment of mortgage and real estate related matters. This week’s topic has to do with a fairly new but up-and-coming trend called equity co-sharing. And it’s for homeowners who have built equity in their home and want to tap into that equity without taking out a new loan. The concept is that the investor will give the homeowner a portion of their equity, up to 17 1/2 percent of the current value, and then from that moment forward, the investor will share in the equity of the home. So the equity previously earned belongs to the homeowner.
On the advertisements that I’ve been seeing, this actually looks really good, but when you read the fine print, it might be a little bit more hesitant to jump on it. Just last week, I got two calls from former clients that had questions on this. And in essence, the the way it works is the amount of sharing that you give to your co-investing partner is about four times the percentage of what you have received from them at the onset. So in other words, if you get 10% of your equity now from your code investor. When it’s time to repay it, you have to give them what you borrowed, plus forty percent of the equity. Some of these go up to 17.5% of the current value, meaning, when you repay the 17.5 you also have to pay four times that amount, which is about 70% back to the co investor.
So that’s 87 percent, basically almost 90% of your equity is paid to the investor in exchange for their initial investment. Now they do advertise it’s not a loan, there’s no interest, those are all true statements, however, the co-sharing could be a little bit more costly. And there’s also some language about the homeowner being responsible for deferred maintenance if it affects the value, which leads me to believe that the contract your clients might sign to get involved with this could potentially give the co investor some say when it comes time to sell their home. So just another little wrinkle there to be aware of.
As always, if you or your clients have questions on this, just give us a call. It’s a little complex and it’s easier to walk through their specific scenario with them. If you want more information on this, or any of our weekly topics that over the MortgageGuidanceGroup.com. And as always, you can reach out to us by email or give us a call, and we’ll cover any topics that you would like. And once again, the website is actually MGGroupTucson. Thanks so much.
Tom Heath
VP / Senior Loan Officer
Mortgage Guidance Group of NOVA® Home Loans
[email protected]
520.495.7213
6893 N Oracle Rd #121
Tucson AZ 85704
NMLS#182420
