New Home Equity Product
The WSJ ran a story on a new home equity product being backed by insurer American International Group Inc. The product is unique in that it allows homeowners to tap into the equity of their home without taking out a loan or moving.
REX & Co. is offering to pay homeowners cash now in exchange for a right to part of the proceeds when the home eventually is sold. According to the article, this is how it works:
“The owner of a home valued at $750,000 might obtain $100,000 in cash by giving REX a 50% share of the change in the home’s value. If the home sold for $850,000, REX would receive $150,000 — the original $100,000 invested plus half of the increase in value. If the home sold for $650,000, REX’s share would be $50,000, half of what it had invested.”
The product is still too new and there are several variables in the equation that could cause funding failure issues, but only time will tell. If it does work, it could provide homeowners who are sitting on appreciating assets (house) with an avenue for paying back their debt more cheaply.
Popularity: 10%