Home Equity Release Products: What are They and How Do They Work?

April 5, 2019

After purchasing a residential property, a home has been building up equity due to its appreciation. This equity can be tapped into using a range of home equity release products which allow homeowners to gain money upfront for a variety of reasons, such as performing renovations or paying for an emergency. Another advantage is that homeowners still retain ownership of the home whilst accessing the cash they need.

unsplash-logoRowan Heuvel

Types of Home Equity Release Products

Home Equity Loans

Home equity loans are also called second mortgages. They allow you to borrow against the value of your home. You receive a single lump sum of money from the lender that you then pay back in monthly installments.

This home equity release product normally has fixed interest rates and are easier to get approved for. Yet they also place more debt on you as you have to make payments to both your first and second mortgage. Companies that offer home equity loans include CitiMortgage, loanDepot and US Bank.

Home Equity Lines of Credit (HELOC)

HELOC is another type of home equity loan where you get to borrow an approved amount up to the credit limit. Yet instead of getting a single lump sum, you can borrow smaller amounts over time.

You only take out what you need and only pay interest on what money is used. Also, there is a fluctuating interest rate as monthly repayment amounts can change. Lenda, SunTrust and PNC are lenders that provide HELOC products to homeowners.

Alternative Home Equity Release Products

If acquiring additional debt on top of your regular mortgage isn’t a keen idea, there are alternative home equity release products. Companies such as Patch and HomeTap offer cash based on a percentage of the home’s equity. In exchange, the companies invest in the home’s future price appreciation.

Another alternative product is offered by Equifi. The company will allow a homeowner to access the equity in exchange for a portion of the home’s value when the house is sold, if the owner passes away, or if the owner prepays the amount.

Richr is working on launching its own unique financial products to help people fund their downpayment when buying, and release equity when they are staying in their homes. By trading equity in their home in exchange for capital, with no debt and no monthly repayments, you can live your life and enjoy your equity. Definitely something to smile about!

unsplash-logoAllen Taylor

Should You Use Home Equity Release Products for Pre-Sale Repairs?

If you need money to make repairs to your home before placing it on the market, a home equity release product can help. Just make sure to not get a loan or HELOC amount that is higher than what you plan to pay in repairs, and ensure that the renovations will improve the value of the home. 

If you would like to pre-register and hear more about Richr’s forthcoming co-ownership products, please email us at hello@richr.com and we will let you know about products we are developing.