What is a home equity investment offer and who is it for?
A home equity investment (sometimes called a shared equity agreement) is like a traditional home equity loan in that it allows you to cash out some of the equity in your home. However, the structure of the agreement and repayment terms are different.
With a traditional home equity loan, the loan is a debt that shows up as a tradeline on your credit report. You agree to repay the loan with monthly payments due over the term of the loan and your payment history is reported to the credit bureau.
With a shared equity agreement, you are not taking out a loan and you have no monthly payment obligation. Instead, in exchange for the equity value (funded amount) that the investment company gives you, you will agree to give the company a minor "ownership stake" in the property. You still own your home but the "investor" participates in the increase — or decrease — in the value of the property during the agreed-upon term.
How a shared equity agreement works
You have a home improvement project with an estimated cost of $25,000 or greater and want to explore your options to fund this project.
If you qualify, the investment company will offer to fund you that money
In return, you will agree on a stake — a percentage — of the future appreciation of your home that will be paid upon the end of the term of the agreement or sooner if repaid early. The investment company will provide you with the options and specifics when you finalize the terms of the agreement.
You make no monthly payments to the company
The company has no occupancy rights, but there is a lien against your property, just as with a typical loan
At the end of the term of the agreement, you will pay back the amount you were originally funded (the equity value the company gave you), plus the agreed-upon share of the home’s appreciation. Typically, you also have the option to pay back earlier with no pre-payment penalty by refinancing,
Who might benefit from a shared appreciation agreement?
For most homeowners, this is an alternative to a HELOC or home equity loan. Companies offering home equity investment are able to underwrite to more forgiving standards, which means homeowners that might have substantial equity in their home, but don't qualify for a HELOC or home equity loan can often qualify for a shared appreciation agreement.
How do I explore shared equity offers on Acorn Finance
When you check for pre-qualified offers on Acorn Finance, if the amount requested is $25,000 or more and you live in a state served by our equity providers, you will have the opportunity to provide additional information on the application.
If you qualify, the offers page will include your pre-qualified home equity investment options.
From there, our funding partners have all designed a very hands-on process to guide you thru the information so you understand all the details and how this option will work for you.
To connect with a specialist and refine your options, simply select one of the Home Equity Investment offers. This will take you to the provider's website experience, so you can explore more information and review the details before deciding how you want to move forward.
If you choose to proceed with an agreement, the investment company will fund you by direct deposit into your bank account. Typically, funding will happen within 2-4 weeks.