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Unlike debt-based home equity solutions such as fixed-rate home equity loans, home equity lines of credit, aka HELOCs, cash-out refinances, reverse mortgages, and the like—a home equity investment has no monthly payments or interest, making it an attractive alternative for those who are debt-averse. A home equity investment is essentially capital granted to homeowners in exchange for an investment in the homeowner’s residential property. Instead of making monthly payments, the homeowner settles the investment before or at the end of the term in a lump sum.While home equity investment services are still up and coming within real estate, there are several companies that offer similar products. Understanding the nuance behind each offering is crucial for homeowners who are considering taking on an investor in their home.The ProcessMost home equity investment providers follow a similar process:Homeowner completes the applicationAn investment estimate is receivedA home value appraisal to scheduled and providedAn official investment offer is presentedWhat’s the difference between home equity investment providers?Where companies differ includes term length (i.e. how long the homeowner has to settle the investment), qualification terms and prerequisites, operational states, closing fees, investment size and investment structure.Specifically within the investment structure is where the biggest differences lie between home equity investment providers. This includes the percentage of the home’s future value an investor will be entitled to receive when you sell, refinance, or buy them out, along with other factors included in the settlement total.2 Model ApproachThe majority of home equity investment providers reference one of two models to determine the settlement total: share of home value and share of home appreciation. The option chosen can impact the amount owed at settlement.Share of Home Value ModelIn this model, the investor provides the homeowner with a lump sum (cash) in exchange for a minority stake in the future value of the home. When the investment’s term ends or the house is sold, the homeowner pays an agreed-upon percentage of the current home market value to the investor. This suggests that if depreciation took place within the term, the percentage owed will be less, and the investor may not make a profit.Share of Appreciation ModelSimilar to the Share of Home Value, in this model, the investor provides the homeowner with a capital lump sum, only in this model it's in exchange for a percent of future appreciation. When the home sells or the investment term ends, the homeowner pays the original investment amount, plus a variable percent of the appreciation.So, which model is right for you?The best way to make use of your home equity depends on three key factors: your home’s current value, how many investment dollars you’re hoping to use, and the length and terms of the investment itself.This chart illustrates how these two models play out for a $500,000 home with a $50,000 investment over ten years, assuming five percent annual appreciation.Have an idea of your home’s value and an investment size that fits your financial goals? Insert your numbers to get an idea of how much you may owe at settlement for each model. Keep in mind that this is just one of the factors you’ll want to consider when comparing all your options.Check out Hometap for more information on the difference between the share of home value and share of home appreciation models.

Using equity to buy a new home is a great strategy, whether you’re hoping to trade up into a bigger house or downsize your monthly expenses.Pulling together the down payment for a new house while getting your current property ready for sale is a double burden. At the same time, you’ll have to manage moving expenses. Buying a new home with equity can help keep your savings intact while you cover all these costs.If you’re wondering how to buy a new home with an existing mortgage, we’re here to help. Here are 4 common ways of using equity to purchase a new home:Home Equity Loans: A home equity loan is often the first option homeowners explore because it’s a familiar tool. A home equity loan is a bank loan that uses your house as collateral, much like your original mortgage.AdvantagesOffer some of the lowest rates available to consumers.Are available through your existing bank relationship.May include interest that is tax-deductible, depending on how you use the funds.DisadvantagesYou risk your current home by pledging it as collateral. If you can’t sell and you lose your income, you could forfeit your house.If the market declines and you can’t sell the house for as much as you borrowed, you’ll be in debt.Your lender may dictate terms you don’t like, such as not allowing you to rent out your house while you look for a buyer.Application fees, appraisal fees, and underwriting fees can be high.If you’re still paying on your mortgage, you’ll have to afford both payments each month.Terms, Conditions, and RequirementsLoan terms range from 5-30 years.Interest rates for home equity loans are fixed.You can usually borrow 80–90% of your home’s equity.You need a good credit score. Most lenders look for 700 or above.Your debt-to-income ratio should be 40% or less.You’ll need proof of income and ability to repay the loan.Home Equity Line of Credit: Another tool for using equity to buy a new home is a home equity line of credit, or HELOC. Like a home equity loan, you apply for a HELOC through a bank and pledge your house as collateral.AdvantagesAllows you to take out debt as you need cash, so it’s a flexible tool if you’re not sure how much money you’ll need.Comes with low rates compared to personal loans or credit cards.Is available through your existing bank.May include interest that is tax-deductible.Provides flexible repayment options.DisadvantagesAs with a home equity loan, you may risk losing your existing house.Variable interest rates mean you can’t be sure of your total expense in advance.If you’re not disciplined, having a high credit limit could encourage you to borrow more than you need — or can repay.If you’re still paying on your mortgage, you’ll have to afford both payments each month.Terms, Conditions, and RequirementsLoan terms range from 5-10 years.Interest rate is variable.You can usually borrow 80–90% of your home’s equity.You need a good credit score. Most lenders will want 700 or above.Your debt-to-income ratio should be 40% or less.You’ll need proof of income and ability to repay the loan.Bridge Loans: Another method of using equity for a new home is a short-term loan called a bridge loan. These are designed especially for homeowners who are managing the transition from one house to another.AdvantagesShort terms with clear end dates.Payments that can be deferred until after you sell your house.DisadvantagesHigher rates than a home equity loan or HELOC.Smaller loan amounts.Multiple payments if your loans overlap.Terms, Conditions, and RequirementsLoan terms range from 6 months to 3 years.Rates can be fixed or variable.You can usually borrow 80% of your home’s equity.You need a good credit score. Most lenders will want 700 or above.You’ll need proof of income and ability to repay the loan.EasyKnock’s MoveAbility Program: EasyKnock’s MoveAbility is an innovative method of using equity to buy a new home. This sale-leaseback option lets you sell your house for cash and continue to live in it as a tenant for up to a year.AdvantagesLets you stay in your home for up to 18 months while you make repairs and shop for your dream home.Is fast — get cash in hand in just 13 days.Lets you use funds for down payments, home repairs, moving expenses, and more.Helps you pay off your existing mortgage, which will help you qualify for a new one.Allows you to choose when you’re ready to list your home.Comes with low fees: you pay 1.5% of your home’s value and then pay market rent.DisadvantagesYou give up any property appreciation that happens after you become a renter.As a renter, you may need approval to make significant changes to the house.Your rent may be higher than your mortgage payment.Terms, Conditions, and RequirementsMoveAbility is only available to people selling single-family homes, condos, or apartments.With the program, you gain access to up to 75% of your home’s equity.You’ll pay market rent based on similar properties in your area.You can renew your lease for up to 12 months with a renewal fee of 1% of the total purchase price every six months.If you’re curious about this innovative option, read more about the MoveAbility program, and find out your home qualifies.The Final WordIf you want to buy a new home with an existing mortgage, your options include three types of loans or a sale-leaseback program like EasyKnock’s MoveAbility. Getting a loan means going through a bank lending process and then dealing with double payments. A sale-leaseback option like MoveAbility buys you time to shop for the perfect house while giving you the cash you need for home improvements and a down payment.Source: https://www.easyknock.com/blog/an-ingenious-new-way-for-using-equity-to-buy-a-new

If you plan to take a loan to remodel your home, here are the pros and cons of using a home equity loan or a personal loan:Pros of Home Equity Loan1. Low-interest rates: Home equity loans are taken against the property purchased. You mortgage your equity on the property in return for the loan. Due to the pledging of collateral, you can get a loan at low-interest rates.2. Tax Saving: Home equity loans are tax-deductible.3. Ease of approval: Instead of opening another credit line, use your equity in the property is much easier. A home equity loan or a top-up loan will be approved more quickly since you already have a relationship with the lender.Cons of Home Equity Loan1. Mortgage: Since it is a secured loan, adding it to your pre-existing debt may cause problems. If you are unable to repay the loan, you can lose the property.2. Market prices: If the property prices dive in the future, you may end up losing a bigger share of your property and there will be a significant spike in the interest rate / tenure (or both). .Pros of a Personal Loan1. Dedicated home improvement loans: Lenders offer home improvement loans which are personal loans dedicated to serving this purpose.2. Unsecured loan: The loan is unsecured, which means that you don’t have to mortgage any asset3. Quick and hassle-free: You can apply for a personal loan online and get an amount upto INR 30 lakhs (max. loan amount depends on your eligibility) disbursed within 24 hours* of approval, after your application has successfully cleared all required verification checks. .4. Fixed Interest rates: Most lenders provide personal loans at fixed interest rates, which are not subject to market changes. Thus, your EMI and tenure remains stable throughout the tenure of the loan.Cons of a Personal Loan1. Higher interest rate: Since it is an unsecured loan, the interest rates are higher than that for secured loans.2. No tax benefits: Since personal loans are not taxable, you do not receive any tax benefit.*Depends on various criteria, including the lender’s policy at the time of loan application.