Equifi Review: Shared Equity in Your Home
Equifi lets you tap into home equity without taking a reverse mortgage or home equity loan. Equifi doesn’t require you to make monthly payments, but rather you pay Equifi back with the future appreciation of your home.
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Equifi gives homeowners an alternative way to borrow against the equity in their home that does not involve getting a reverse mortgage or taking a home equity loan or HELOC. With Equifi, you can quickly access cash in exchange for an interest in your home’s equity and the future appreciation of your home. You don’t have to worry about monthly payments, you get your money upfront, and the amount you pay back depends on how much your home appreciates over time.
Equifi can be paid back when you sell your home, if the homeowner dies, or if you decide you want to prepay the money. When you pay Equifi back, it gets paid based on a portion of your home’s value. This Equifi review will help you to understand if this type of shared appreciation loan is right for you.
In this review:
- Getting a Loan Through Equifi
- Basic Information: Rates, Terms, Fees & Limits
- The Benefits of Equifi
- The Downsides of Equifi
- Equifi Alternatives
Getting a Loan Through Equifi
Equifi hasn’t launched yet, but it plans to start making investments later in 2019 in select markets. Currently, you can join the wait list to get funding through Equifi by contacting [email protected]. When you contact the company to find out about getting a loan in the future, you should put the subject “EFI Launch Date” in the subject line so the company knows that you wish to be provided with a notification when funding becomes available.
Equifi has also indicated that they are currently conducting small pools prior to making loans available to the broader market. Those who are well-qualified and who have an appropriate property should contact the company to find out if it might be possible to become one of the early borrowers.
Basic Information: Rates, Terms, Fees & Limits
Because Equifi hasn’t launched yet, the company has not yet provided specific details on the type of borrower who will qualify for Equifi loans. However, the company has provided some examples of the ways that their investment product, EFI, will work.
Equifi suggests using its product to reduce your mortgage value to a maximum loan-to-value ratio (LTV) of 80%. This would mean that you’d borrow 80% of what your home is worth from your traditional mortgage lender.
You would make a 10% down payment and EFI would provide the other 10%, giving you a 20% total down payment. You would not need to pay private mortgage insurance with this approach, unlike if you bought a home with only a 10% down payment. There would be no payments to Equifi until you sold your home unless the homeowner passes away or you decide to prepay the funds received from the company.
Equifi also suggests using its product to refinance your home to get cash out of the house, providing the example of borrowing 25% of your home’s value with Equifi. Depending on what your home is worth and what you currently owe, you could borrow a substantial sum of money.
In any scenario where you borrow through Equifi, payment is based on a portion of what your home sells for, so the lender shares in both the upside and the risk. If your home goes up in value, Equifi gets more money and if it goes down in value, Equifi is paid back less.
The Benefits of Equifi
There are some clear benefits to borrowing money with Equifi. Some of the advantages include:
- No monthly payments. Normally, if you get a home equity loan or a home equity line of credit, you end up having to pay back your lender each month. This reduces your cash flow and can make doing other things with your money more challenging. Equifi lets you tap into equity in your home while freeing you from having to make monthly payments.
- Flexibility. You have the choice to pay off Equifi early if you want to, or you can wait until you sell your home. You retain control over the home and the sales process.
- Shared risk. If your home goes down in value, Equifi shares some of the loss with you. You can better diversify your investments by taking money out of your home through Equifi, so it is a great way to diversify yourself away from real estate—especially if you are equity rich but need more spare cash available to you.
The Downsides of Equifi
Unfortunately, there are also some downsides that you need to be aware of before you try to get funding through Equifi:
- Financing is not currently widely available. While Equifi is making some funding available to small pools of qualified borrowers in qualifying areas, EFI funding isn’t yet available to the general public. All you can do at this point if you want to borrow through Equifi is put your name on the waiting list or contact the company to see if you can be part of its initial pool of borrowers who receive investor funds.
- The company is very new. It’s not yet clear how Equifi will rate in terms of customer service, fees, or upfront expenses since the company is so new.
- You could end up paying more. If your company is in an area where prices skyrocket and you are sharing the appreciation value of your home with Equifi, you could end up paying significantly more to borrow this way than if you just took out a traditional home equity loan or line of credit.
- You get one-time access to cash. You get the money upfront when Equifi invests, but don’t have the flexibility to borrow and draw funds as needed. If you want to have more flexibility in when you are able to access credit, you should consider a home equity line of credit instead.
Equifi is not the only lender that is offering home equity sharing agreements. There are other options out there, including Point and Patch Homes, that also allow you to borrow against the equity and future appreciation of your home.
Both Point and Patch Homes work similarly, in that you can borrow if you have equity, make no payments now, and pay back the funds in the future when you sell your home. And both Point and Patch Homes are already making loans in select areas across the nation, so you may be better off with one of these lenders if you need equity now and do not want to wait for Equifi to begin offering financing.
Bottom Line: Equifi Home Equity Right for You?
Equifi Home Equity may be a great option if you want to borrow against your equity to buy a new home or to get money out of your current one. You can join the waitlist now or wait until the company opens up financing to the broader market to see what loan terms you may be offered and how payback and qualifying for funding will work.
Author: Christy Rakoczy