What are shared equity products?
Shared equity products (SEPs) – sometimes referred to as home equity investments (HEIs), home equity agreements (HEAs), and shared appreciation agreements (SAAs) – are innovative financial arrangements that enable homeowners to access the equity in their home by selling a share of the future appreciation of their property rather than taking on debt. Because SEPs are an investment in the future value of the home, the payout for the SEP is based on the value of the home when the homeowner pays back the investor, which is usually when the homeowner sells or refinances. This gives the homeowner the financial flexibility to make home improvements, pay off medical expenses, or finance a business.
Why are SEPs useful?
In evolving or uncertain economic times, homeowners deserve fair and transparent options when choosing what is best for their financial future. SEPs financially empower a socially and economically diverse group of homeowners, especially those who choose to look beyond or cannot qualify for traditional loans or lines of credit. SEPs offer numerous benefits that give homeowners a flexible way to manage their finances.
- No monthly payments or interest, so the pressure of ongoing costs is eased.
- No credit or income requirements, creating fewer barriers and easier access to cash.
- Flexible and convenient repayment, eliminating the burden of a fixed repayment schedule.
- Aligned interests of homeowners and investors, creating a mutually beneficial arrangement rather than a one-sided, interest-ridden loan.
- Since SEPs are not loans, homeowners are not personally liable if the amount the investor receives at settlement is less than the amount they are entitled to under the contract.
How does the process work?
All members of the Coalition for Home Equity Partnership (CHEP) offer shared equity products, but the process is slightly different for each. Homeowners work with a member company to get an estimate of equity in their home, apply online, receive an offer, and get funded. Simple as that.
Conclusion
SEPs are an innovative, equity-based financial solution tailored to fix the growing need for alternatives to loans and home equity lines of credit. SEPs enable homeowners of all ages and incomes to access the equity they have built in their home, without the burden of monthly payments and interest.
For more information, read our FAQ guide or contact info@homeequitypartnership.org.