Questions about shared equity
A shared equity release is an investment in a piece of property, a purchase of part of the equity. There is no loan, interest charges or monthly payments associated with this arrangement. A shared equity release is also referred to as “fractional equity release”, as the shared equity buyer, Quantm RE becomes a partner with the owner of the property, and shares in both the appreciation or depreciation in the value of the property over time.
A shared equity release 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 any appreciation or depreciation in the value of the property over time. This means that if the property appreciates in value over time, that when you sell, you’ll realize less of that appreciation in value, as a portion of it will be paid to us.
Shared equity arrangements as a way of financing personal housing has been going on 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 doing shared equity financing. Our business approach includes the ability for secondary trading of the equity investment without impacting the home owner and also can be done with non-owner occupied single family homes that are held as investment properties.
Shared equity release is not a loan or a reverse mortgage. In a shared equity release with Quantm RE, the homeowner will not bear the typically high costs associated with a reverse mortgage, nor do you have to be 62 years or older (our shared equity release program is available to all qualified property owners regardless of age). Quantm RE pays US$ for a percentage ownership in a piece of property 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, Quantm RE is now a partner, in effect, with the homeowner, sharing in either the upside appreciation of the property, or the downside depreciation if that were to occur. When the property is eventually sold, then Quantm RE will be paid back its original investment plus or minus our agreed share of the appreciation/depreciation in the value of the property.
Shared equity could be the right solution for someone who wants to get cash out of their property without taking on additional debt and monthly payments. The homeowner can stay in their home as long as they want, and normally pays to Quantm RE at the time of sale of the property, repaying the original amount paid they received for the portion of their property purchased, plus that agreed share of the gain or loss in the value of the home during the time of the shared equity release arrangement. 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 shared equity transaction.
Homeowners are listed as owner on title. QuantmRE will record with the county recorder’s office a Performance Deed of Trust on your property. This is a lien on the 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.
Will the property owner need to service debt from the shared equity release or just transfer the % of the amount of the property sold when the eventually sell?
Since a shared equity release is not a loan, there is no debt to service associated with it. The homeowner is simply obligated to transfer to us, upon sale of the property, the value of the percentage of equity that we originally bought, plus any appreciation or minus any depreciation associated with our portion.
No- we do not require the home to be owner occupied. Shared equity 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 shared equity agreement with Quantm RE.
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 Quantm RE’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 Quantm RE 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 Quantm RE does not unnecessarily take a loss on equity in the event that market conditions are not favorable at that time.
QuantmRE will have an appraisal by an independent qualified appraiser, to determine the value of the subject property.
Our objective is that you will be able to be paid in US$ or crypto currency.
How will a shared equity transaction affect my tax situation on my personal residence before a sale?
At the time you receive the payment from Quantm RE, 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.
In the event of death of the property owner, Quantm RE RE’s equity interest remains in the property, and all obligations of our agreement with the deceased owner pass onto the heirs of the property.
You, as the homeowner, always remain in control of your property and can decide to sell your home anytime you wish. After 30 years, you will need to either buy out Quantm RE’s interest in your home, 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 Quantm RE holds in your property.