Startups Have Unusual Pitch for Homeowners Strapped for Cash: Let’s Own This House Together

Peter Rudegeair and Christina Rexrode reported earlier this week at The Wall Street Journal Online that, “Some well-funded startups have an unusual pitch for homeowners strapped for cash: Let’s own this house together.

“A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

“Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac ,which recently agreed to buy loans on properties where one firm, Unison Agreement Corp. , contributes to the down payment.”

“Silicon Valley Explores a New Investment: Your Home,” by Peter Rudegeair and Christina Rexrode. The Wall Street Journal Online (February 18, 2018).

The Journal writers explained that, “The length of the contracts can vary from a few years to 30. Homeowners can repay early, including if they sell their house before the term ends. How much they end up owing depends on how the value of their home changes. Because the funds are equity, not a borrowing, they don’t require monthly payments.”

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