Newsweek - National News, World News, Health, Technology, Entertainment and more... | Newsweek.com
SPONSORED BY
Full Post
Posted Saturday, June 14, 2008 1:22 PM

Finance: Cash, On the House

Linda Stern

Want to take cash out of your house but afraid to borrow? A new crop of no-payment home-equity products is coming to market. The catch: you trade away a piece of your home’s future appreciation for cash now. Unlike traditional reverse mortgages, they are not structured like loans, the fees are lower and there’s usually not an age restriction. With a Rex Agreement (rex agreement.com), you can get $71,000 on a $500,000 home if you agree to split future changes in value 50-50 with Rex & Co. You have to stay in your home for at least five years. (If you want out sooner, penalties run as high as 25 cent of the original sum you received). If the value of your home goes up to $600,000, you’ll owe Rex $121,000 when you sell. That’s the original $71,000 plus $50,000 for half the appreciation. If the value falls to $400,000, you’ll pay $21,000; that’s the original amount minus half the depreciation. Other similar new products are EquityKey (equitykey.com) and My Equity Freedom (granderfinancial.com). Closing costs run as high as $4,000, so look before you leap.

Advertisement
Tag(s):
You must be a registered user to comment.  Click here to register.  Already a user?  Click here to login.

Member Comments

Posted By: matthew.rosen@equitykey.com (June 14, 2008 at 6:17 PM)

Just for the sake of accuracy, EquityKey does NOT charge closing costs.  While this product is in the same category of companies like REX, there are significant differences that consumers should understand.  For example, with EquityKey if the property value drops you don't owe them back on the depreciation - they are a true appreciation sharing product.  As an option, they are only entitled to their investment if the property appreciates above the strike price.  The most important thing for clients to realize is that while equity release products are great ways for clients to extract cash, they should have a plan for how they want to use the money so that they reap the greatest benefits.