What Is a Home Equity Investment? The Basics

Falling behind on your mortgage doesn’t necessarily mean the end of homeownership. In fact, with a home equity investment (HEI), you might be able to retain ownership of your home and give yourself the financial flexibility you need to get back on your feet. If you're not sure where to start, read on.

What Are Home Equity Investments?

Simply put, a home equity investment — also called a home equity sharing agreement — enables homeowners like you to sell a portion of your home’s future value in exchange for a lump sum payment and co-ownership rights. In essence, an investor claims an equity share or a portion of your home equity.

The investor pays off your lender directly and gives you cash for a share in your home's equity. This can give you some financial breathing room and remove the foreclosure potential from your shoulders.

After the home equity investment takes place, you’ll make a simplified monthly payment to the co-owner or investor to cover property taxes and related fees. You can then use all the money you saved from your regular mortgage payments to pay off other debt or to save up for an eventual buyout (in which case you can reclaim total ownership of all the equity in your property).

Like many other loan and refinancing instruments, like a cash-out refinance, a home equity investment is dependent on your home’s value. 

As your home’s appreciation increases, you’ll get access to more money for a variety of needs, like:

• Home improvements and renovations
• The down payment for a new property, like a rental property or second home
• Funding for a reverse mortgage
• Paying off credit card debt and other debt
• Paying off student loans or personal loans

It’s vital to understand how this financial product works and the specifics of your financial situation before agreeing to a home equity investment for your existing mortgage. 

How Do Home Equity Investments, Home Equity Loans, and HELOCs Compare?

Home equity investments are particularly attractive prospects compared to other equity instruments, like home equity loans and home equity lines of credit (HELOCs). Here’s a breakdown of the different requirements you need to access each of these instruments.

Seen in this light, it’s clear that home equity investments are much more accessible for many homeowners. Even if your credit score isn’t amazing, you may still qualify for a home equity investment, which you can use to escape foreclosure and other negative financial consequences.

How Does a Home Equity Investment Work?

For many Americans, it can be tough to know how exactly a home equity investment works and what it’s really about.

When you participate in a home equity investment, an investor, like Balance, gives you cash in exchange for a percentage of your home's equity and shares in the future potential appreciation of the property.

As a co-investor, Balance shares in the costs, appreciation, and depreciation of your home. By sharing in your home’s future appreciation, Balance is able to offer affordable terms, low monthly payments, and flexible qualifying criteria.

Balance has no minimum term, and you reserve the right to buy us out at any time. In the meantime, you can work to strengthen your overall financial profile, improve your credit score, pay off debt, or make necessary home repairs. Balance co-owners have ongoing access to a portion of their home equity, helping them avoid any setbacks while their credit recovers. This means you can submit a request for access to additional cash in order to avoid missing payments or taking on high-interest debt.

Balance is committed to helping you rebuild your credit and financial health — so you can create your path back to traditional homeownership.

What Are the Benefits of a Home Equity Investment With Balance?

There are several key benefits and advantages to working with Balance. For example:

• We have no minimum credit score requirements.
• With Balance, you only need to make streamlined monthly payments directly to us to pay for your share of costs, like property taxes. 
• When you enter a home equity investment with Balance, you can receive a lump sum cash payment based on the current equity you’ve built up in the property.
• As a co-owner, we also share in the depreciation of your home, so we have a vested interest in ensuring your property is kept up-to-date, well-maintained, and looking good.

Contact Balance Today

As you can see, a home equity investment could be just what you need to stabilize your finances and avoid foreclosure. Even better, you can pursue a home equity investment with Balance starting today.

At Balance, we’ll provide you with a lump sum payment to invest in your home's equity while giving you the option to buy us out later on. In the meantime, you can use that cash to pay down debt, improve your credit score, and much more, all without having to move.

Want to learn more? Contact Balance today!

Sources:

What Is a Home Equity Sharing Agreement? | NerdWallet

Home Equity: What It Is, How It Works, and How You Can Use It | Investopedia

How a Home Equity Loan Works, Rates, Requirements & Calculator | Investopedia

What is a home equity line of credit (HELOC)? | Bank of America