How to get a Home Equity Investment

When it comes to tapping into the equity in your home, you have more options today than ever before. Home Equity Investments, also known as HEIs, are leading the charge in increasing the variety of home equity solutions on the market. 

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With a Home Equity Investment, homeowners like you can unlock home wealth without the traditional constraints of loans. Whether you're looking to finance a major project, consolidate high-interest debt, or diversify your investment portfolio, understanding how to leverage your home equity through an HEI can provide you with a useful tool in your financial arsenal. 

What is a Home Equity Investment?

Think of a Home Equity Investment as an alternative route for accessing the wealth in your home. You’re likely familiar with a few common financial products that serve this purpose, such as cash-out refinances, home equity loans, and home equity lines of credit (HELOCs). While these tools have different features, the underlying structure is the same – you receive cash, secured by your home, and in return, you make a monthly payment for the duration of your term. The cost of the funds is determined by current interest rates. 

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A Home Equity Investment is a little bit different. Some things are the same – you’re still receiving cash, which is secured by your home. However, a Home Equity Investment is just that – an investment. That means that instead of making a monthly payment with interest, you’re sharing a portion of your home’s value with the investment company. How much you spend is determined not by an interest rate, but by how much your home appreciates during the term, which can be up to 30 years. Because of that, there are no monthly payments. 

How to get a Home Equity Investment

While an HEI is an innovative product, the process for getting one should be familiar to anyone who has ever taken out a mortgage. 

1. Take a look at your finances and home

Home Equity Investments come with more flexible qualification requirements – you can qualify with a credit score above 500, and your income is not a factor. However, you do need a large amount of equity in your home to get an HEI, so understanding your loan-to-value (LTV) ratio is important. You can calculate your LTV by dividing how much you owe on your mortgage and any other outstanding debts tied to your home by the total value of your property. Different HEI companies will have different qualification criteria, but here are a few additional things we consider at Point: 

• Investment amount of $30k-$500k
• Home value of at least $250k
• Eligible property type and location (farms on acreage and manufactured homes are ineligible at this time) 
• Primary and investment properties can qualify – including rental homes 
• No bankruptcies within the past seven years 

2. Explore your options

There are a variety of home equity options on the market today, and you should do your research to make sure you’re moving forward with the best solution for you. Spend some time comparing features to be sure that an HEI fits your long-term financial needs. A few key factors to consider when choosing a home equity solution are: 

• Repayment terms – Are you looking to maximize your cash flow while taking funds out of your equity, or do you want to prioritize the lowest cost over the life of your deal? 
• Qualification requirements – Do you have a strong income and a high credit score? Are you looking for your primary home or for an investment or vacation property? 
• Term length – How much time do you need to repay? Is a 10-year option enough, or do you want 30 years just in case? 
• Long-term plans – Do you plan to stay in your home forever, or will you eventually downsize? Do you care about passing your property down to your heirs? 

3. Prequalify and see your offer 

Once you’re sure that a Home Equity Investment is the right move, the next step is to check your eligibility and see how much of your home equity you can unlock. This will take just a few minutes, but you should take the time to understand all aspects of your preliminary offer, including potential repayment scenarios and costs. 

4. Get ready to apply 

In order to streamline your application process, get your house in order. Prepare the documentation you’ll need, such as identification, mortgage payment statements, and payoff statements for any debts you hope to pay off using your HEI proceeds, such as credit cards or consolidation loans. This will help you respond to requests from your HEI provider promptly. 

5. Go through underwriting and get an appraisal  

To finalize your offer and make sure you qualify, your Home Equity Investment company will verify your financial information via underwriting and confirm your home’s value with an appraisal. This process will be very similar to what it was like when you first purchased your home – albeit with some additional work to make sure the title of your home is clean. Take the time to prepare your home for the appraisal – this will help ensure that your home value comes in as high as possible. This is the longest part of the process – the timeline will depend on a few factors, such as the availability of appraisers in your area, and how responsive your county is to inquiries about your title. 

6. Close the deal

After appraisal and underwriting, you’ll receive your final offer and go through the closing process. A mobile notary will come to your home (or the location of your choice) to sign the closing documents. Just like with your first mortgage, there will be a rescission period where you can change your mind. Your closing costs will come out of your investment amount, so you don’t need to worry about bringing cash to the closing. 

7. Receive your funds

Once your investment closes, that’s it! Your HEI funds will be wired to your account, and you’ll be free to enjoy your home equity wealth. Pay down those debts, take care of that home repair, and rest comfortably knowing that you have the extra financial cushion in your account. There are no monthly payments, which means you do not need to pay anything for up to 30 years. 

8. Repay your Home Equity Investment 

Different HEI companies have different terms and requirements for repayment. If you work with Point, you get a flexible, 30-year term for your Home Equity Investment. That means that repayment happens on your timeline – there are no penalties for paying back early, and you can repay your HEI when you sell, refinance, or via another source of funds. Point’s HEI is also assumable, which means you can pass the property to your heirs without any acceleration. 

Final thoughts 

A Home Equity Investment is another great tool for your arsenal as a homeowner looking to tap into home wealth. Understanding this financial solution, and how it compares to other products such as the home equity loan and HELOC, will empower you to make the best choice for your financial needs. If you’re curious to see how much you can get with a Home Equity Investment, complete this quick, 2-minute form.

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