For most people looking to tap their equity, a home equity loan or line of credit is the traditional route. But now, a number of innovative products have come to market that help homeowners tap into their equity – without incurring any debt.
Looking to take advantage of home price growth – which has given homeowners access to $5.9 billion in tappable equity, according to Black Knight data – companies across the country are launching homeownership investment and sale-leaseback products to give consumers debt-free equity access.
Here’s a rundown of some of the alternative equity release products on the market right now:
Unison Home Ownership Investors
A long-time leader in the homeownership investment space, Unison invests in 5-20% of a home’s value, offering that number to its clients in cash. Clients retain full ownership of their homes and can renovate or sell at any time.
After 30 years, the deal reaches maturity and Unison takes its cut of the home’s appreciation – typically 35%. Or, homeowners can repay Unison’s investment after three years, sell or apply for an extension.
The company launched in 2007 but has expanded its reach notably this year. Unison Chief Strategy Officer Brian Elbogen told HousingWire it plans to expand to 30 states by the end of 2018.
“Home price appreciation and the resulting rise in homeowner equity, combined with other macro trends, point to a growing need for more flexible solutions,” Elbogen said.
Another homeownership investment company, HomeTap offers access to up to 20% of a client’s equity in cash for a 10-year term in exchange for the chance to share in their home’s appreciation. If the home’s value declines, Hometap shares in the loss.
HomeTap launched in Massachusetts this summer and quickly expanded to California, with a multi-state expansion pending.
“It’s an enormous opportunity for homeowners to be able to tap into some of that equity that they’ve been able to build up through time and home price appreciation and through dutifully paying down their mortgage, and then be able to take advantage of that and use that equity for other items of importance in their lives,” said CEO Jeffrey Glass, who noted that demand for the product has “meaningfully outstripped expectations.”
California-based Patch offers homeowners the opportunity to share their future home price appreciation in exchange for cash, typically between 10-15% of their home's value. Homeowners can pay back the investment within 10 years without any interest or make monthly payments in the interim.
“We were inspired by a big gap in financial markets, where the banks are only capable of offering consumer credit offerings,” said co-founder Sahil Gupta. “The only option available forces consumers to make a choice of increasing their debt burden or not accessing equity in their home.”
Equifi’s Equity Funding Instrument, which was set to launch in California this month and rollout to 16 states, gives homeowners access to their equity in cash in exchange for a portion of the home’s value when they sell, decide to prepay or pass away.
Founder and CEO David Shapiro told HousingWire he aims to transform the way consumers access their equity.
“We all have a stake in the soundness of our financial system and increasing debt-to-income ratios and offering 100% financing ultimately puts our system and our society at risk,” Shapiro said. “With shared equity as an alternative, we no longer are forced to choose between our dreams and our willingness to take on high levels of debt.”
This New York-based sale leaseback startup says it wants to help homeowners get back on their feet.
EasyKnock will buy your house, hand you that equity in cold hard cash, and then rent it back to you for as long as you like. You can renew your lease annually for as long as you like, then buy the house back when you’re ready or decide to move on.
CEO Jarred Kessler said Easyknock is not looking to steal business from reverse mortgage companies or HELOC lenders – it wants to partner with them.
“We’re not looking to compete, we’re trying to collaborate,” he said. “We’re really focused on the people who are getting turned down, we want to help them. Our goal is to become the destination for turndowns and help create more flexibility for homeowners.”
Led by former SoFi Founder and CEO Mike Cagney, Figure introduced the Figure Home Advantage this fall, billing it as an alternative to reverse mortgages. The sale lease-back solution allows homeowners to convert their home equity into cash, freeing them from the burden of property taxes, repairs and maintenance.
“With rising interest rates, cash-out refinancing is an increasingly painful way to meet cash flow needs,” Figure Chief Marketing Officer Wendy Harrington said. “Yet for homeowners nearing or already in retirement, home equity may be the most important source of money they have to support retirement.”
Figure’s product is available in 12 markets, and the company said it plans to be in 40 markets by 2019.