Questions about Home Equity Contracts
A Home Equity Contract allows us to share in the current and future potential increase in the value of your home in exchange for releasing some of the value that is locked up in the equity in your home today. There is no loan, interest charges or monthly payments associated with this arrangement. QuantmRE becomes a ‘silent partner’ with the owner of the property, and shares in both the appreciation or potential depreciation in the value of the property over time.
A Home Equity Contract is a good way to get immediate value out of your home’s existing equity without the need to take on new debt (i.e., a 2nd loan, HELOC, or reverse mortgage). It also displaces some of the risk of depreciation in the event property values decline during a certain period of time. In return, you agree to share with QuantmRE an agreed percentage of the current value as well as some of the appreciation or depreciation in the value of the property over time. This means that if the property appreciates in value over time, you’ll realize less of that appreciation in value when you sell, as a portion of it will be paid to us.
Home Equity Contracts as a way of financing personal housing have been around informally for a long time. The sort of traditional approach in doing this has been for family members of the home buyer, or private or government institutions trying to support homeownership in high cost living areas, to share equity with the primary homeowner occupant. QuantmRE is formalizing what had been an informal arrangement by bringing to market a standardized, legal and market framework for home price movement financing through our Home Equity Contracts. Our business approach includes the ability for investors to trade their interests without impacting the home owner. Our agreements are also available to non-owner occupied single family homes that are held as investment properties.
A QuantmRE Home Equity Contract agreement is not a loan or a reverse mortgage. As a homeowner, you do not bear the typically high costs associated with a reverse mortgage, nor do you have to be 62 years or older (our Home Equity Contracts are available to all qualified property owners regardless of age). QuantmRE pays you in US$ for the rights to a share of the current value and potential future appreciation of an agreed percentage of the value of your home, and records a lien on the property as evidence of the transaction. However, since there is no new loan on the property, there is no accruing interest building up. Instead, QuantmRE is now a partner, in effect, with the homeowner, participating in either the upside appreciation of the property, or the downside depreciation according to the terms of the agreement. When the property is eventually sold, QuantmRE will be paid back its original investment plus our agreed share of the appreciation/depreciation in the value of the property.
A Home Equity Contract could be the right solution for someone who wants to get cash out of their property without taking on additional debt and incurring monthly interest payments. The homeowner can stay in their home for up to thirty years (depending on the contract terms). At the time of sale of the property, the homeowner repays the original investment paid by QuantmRE, plus the agreed share of the gain or loss in the value of the home during the time of the Home Equity Contract. It is important to remember, though, that by sharing in the equity in your home, you will likely receive less in the sale of your home than if you did not enter into a Home Equity Contract.
Homeowners are listed as owner on title. QuantmRE will record with the county recorder’s office a lien on your property that protects our interests, but is not a loan, security or swap instrument. Our agreement with the homeowner is simply a consumer contract that memorializes our investment in the property.
Since a Home Equity Contract is not a loan, there is no additional debt associated with it. The homeowner pays QuantmRE, upon sale of the property, our original investment plus our agreed percentage of the appreciation or depreciation of the value of the home. As the terms of Home Equity Contracts can vary, this is a broad definition only.
No- we do not require the home to be owner occupied. Home Equity Contracts can be a great source of new funding for rental/investment property owners.
The property owner has responsibility to properly maintain the property, pay all property taxes on time and make sure that the property is properly insured in accordance with the provisions of the Home Equity Contract with QuantmRE.
A homeowner may remodel and improve their property as they desire, as long as the planned improvements do not detract from the value of the property, nor entail taking on additional debt that could harm QuantmRE’s interest in the property. All we ask is that the homeowner does an appraisal before and then a follow up appraisal after doing the improvements, in order to measure the increase in value to the property, if any, due to the improvements. This equity value increase will not be part of the equity that QuantmRE later shares in upon sale of the home.
This is fine. The repayment amount will be based on the value of the home at time of the proposed repayment, within certain provisions in our agreement to ensure that QuantmRE does not unnecessarily take a loss on equity in the event that market conditions are not favorable at that time.
QuantmRE will carry out an appraisal by an independent qualified appraiser, to determine the value of the subject property.
Once we have completed the underwriting and completion process, we will send an electronic funds transfer to your bank account.
At the time you receive the payment from QuantmRE, there should be no tax consequence because our transaction is an “open” or “forward” transaction – i.e., the tax consequence will not be known until a future date. This is not tax advice – you should consult your tax advisor for a more exact answer that takes into account your particular situation.
You, as the homeowner, always remain in control of your property and can decide to sell your home anytime you wish. When your Home Equity Contract reaches its agreed term, which may be from 10-30 years after the date of the initial agreement, you will need to sell your home, buy out QuantmRE’s interest, or apply for an extension of the agreement.
Negative amortization loans (i.e. loans where the full amount of interest due each month is not paid and is added to the loan balance) are not allowed. These types of loans jeopardize the equity interest that QuantmRE holds in your property.