Question 1

What is an Home Equity Investment aka HEI, and how does it work?

Accepted Answer

Traditionally, accessing your equity meant taking out a loan that required monthly payments and added debt. Now there is another way to do this by investing alongside you, providing you with a cash payment today in exchange for an option to share in your home’s future change in value. If the house goes up in value, you and investor both win. If it goes down in value, investor shares in the loss.
At the outset of your HEI, a determined starting value for your home by getting an independent appraisal, and then applying a 5.0% Risk Adjustment. Then investor will unlock your equity, giving you money which you are free to use however you want for up to 10 to 30 years.

Question 2

What states are Florida Home Equity Advisors able to offer a HEI?

Accepted Answer

FL, GA, SC, NC, VA, TN, KY, MA, NJ, CO, CT, MA, PA, OH, IN, IL, MO, WI, MN, NE, KS, AR, UT, NV, CA, OR, and WA state.

Question 3

Who qualifies for an Home Equity Investments?

Accepted Answer

Homeowners need to have sufficient equity built up in their home. The more home equity you have, the more cash you can apply for. Homeowners must have a minimum FICO score of 500. In some instances, verification of income to compensate for other factors which may affect the risk of investment; for instance if the property is used as a rental property we may want to verify the rent. The following limitations shall apply: property must be your primary residence; no bankruptcy, foreclosure action, short sale, or deed in lieu within the previous five years; no 90-day delinquencies on any mortgage within the prior 24 months; no 120-day delinquencies on any mortgage within the prior 36 months; HEI can be no greater than 2nd lien position and home must be clear of any liens deemed unacceptable.  You may be required to use investment proceeds to clear any unacceptable pre-existing liens as a condition to close. You may be required to use investment proceeds to pay off certain outstanding debts as a condition to close, including (but not limited to) paying off an amount that is sufficient to result in a debt-to-income ratio (“DTI”) of no more than 45%; minimum investment amount of $30,000; property condition rating, as described in the Uniform Appraisal Dataset (UAD), must be at least C4 or better.

Question 4

How soon can I expect my closing to take on my HEI?

Accepted Answer

Your closing typically takes around 30 days but can take longer for underwriting, appraisal and title commitments. (Having all your requested paperwork for processing and sending you into our portal with designated underwriting will expedite your HEI request).

Question 5

Does it impact my credit score?

Accepted Answer

This does not impact your credit score. As part of the qualification process, we use what's known as a "soft" credit pull to access your credit report. It does not affect your credit score. This usually happens when you submit the application. If you don’t qualify for a HEI you will receive an “adverse action” letter from us explaining that decision, and that letter may reference information found in your credit report. However, this never means that we have used a “hard” credit pull, and your credit will not be affected.
 
Also, over the lifetime the agreement, we will use soft credit pulls to ensure that you are continuing to meet the terms of our agreement. Again, this will not affect your credit score.

Question 6

How much equity can I apply for?

Accepted Answer

The maximum amount of cash available  is $500,000.  The specific amount that can be offered to you depends on four things:
Your home’s current value. In general, the more your home is worth, the more cash is available.
Pre-existing housing debt. This includes all mortgages and credit lines secured by your home.  In general, the less housing debt you have, the more cash is available.
Your credit history. A good credit track record may qualify for more cash.
The use of the property. investor can typically offer more cash when the home is your primary residence.
Note that these factors can affect each other.  For instance, an expensive home with a lot of debt may qualify for less cash than a less expensive home with no debt.

Question 7

What happens at the end of the agreement?

Accepted Answer

You can use the funds for up to 10 to 30 years. After the 10 to 30 years, you will need to either sell your home or buy the investor out.
You are allowed to payoff your HEI at anytime.
In some cases, it might be possible to refinance your home and use the proceeds to buy out your HEI. However, there is no guarantee that this option will be available.

Question 8

Who owns the home?

Accepted Answer

You own the home! You control the property and receive the benefits of home ownership, such as occupancy rights and income tax deductions. Your investor is not an owner and has no rights of occupancy. Rather, investor shares a portion of the future change in value of the home, as an investor. Investor secures the investment without becoming in any way co-owners of your home.

Question 9

In what situations would a HEI not be the right option?

Accepted Answer

A HEI is a unique home financing product that presents a great solution for some people, but it is not the right fit for everyone. First and foremost, it is designed for long-term use—a  HEI is not right for you unless you plan to stay in your home for at least five years. Many of the agreement’s best features, including investors commitment to share in any loss of home value alongside you, only kick in after five years. 
 HEI's are typically for homeowners who live in the home. Additionally, though a HEI is not a loan, it is also not compatible with certain kinds of loans. Reverse mortgages, interest-only loans, shared appreciation loans, or any loan with a negative amortization feature won’t work alongside a HEI.
How the title to your home is held can also affect your eligibility. Typically, investors can only offer a HEI to homeowners who hold their homes as individuals and joint tenants, not tenants-in-common or other forms of holding.
Finally, customers may experience constraints when attempting to refinance their mortgage once they have entered an HEI . Investors recommend that customers who are interested in refinancing their home loan do so before choosing to do an HEI.
Bottom line: HEI's are unique, and so are you. If you're interested in learning whether you and your home qualify, please feel free to apply.

Question 10

What happens if I don't properly maintain my property and its condition deteriorates?

Accepted Answer

During the term of your HEI, you are required to maintain your property in good condition, subject to normal wear-and-tear.
If you do not, when the agreement ends the value of your property will most likely be less than it would have been if it had been properly maintained, and this would not be fair to investor. When this is the case, a Deferred Maintenance Adjustment may apply when performing the settlement calculations.
Since the loss in value would be due to your failure to maintain the property, the Deferred Maintenance Adjustment allocates all of the loss in value due to improper maintenance to you, so that investor does not share in it.
One or more appraisals, inspections or repair estimates obtained from independent third-party providers are used to determine the amount of the Deferred Maintenance Adjustment.
Investor is committed to a fair process to determine the amount of the Deferred Maintenance Adjustment. In a rare instance in which we are unable to agree in good faith on the amount, the issue will be determined through arbitration.

Question 11

Can I buy out the HEI on my home?

Accepted Answer

The goal is to give you as much flexibility as possible. You can buy out of the HEI at any time, but investor will not share in any decrease of value. At a minimum, you’ll have to pay back the Initial Payment  even if your home appraises for less than it was worth at the start of the agreement. An independent third-party appraisal to determine the market value of your property at that time. Then you’ll pay the same amount you would have paid if you had simply sold your home for its appraised value.
The biggest difference between selling your home and buying out is that the investor will not share in any loss in your home's value when you buy out the HEI.

Question 12

What if I make home improvements?

Accepted Answer

If you make improvements to your home (beyond regular maintenance) that boost its value, you should get all the benefits. That’s why we use a tool called a Remodeling Adjustment.
To qualify for a Remodeling Adjustment, you need to work with licensed contractors and fully document the project. Investor then use an independent appraiser to determine how the work changed the value of your home, making sure you receive full benefits. Keep in mind that some renovations add more value than others and some don’t add any new value at all. Whenever you are thinking about a project it is always a good first step to reach out to our team.

Question 13

What happens when I decide to sell my home?

Accepted Answer

You can sell your home at any time. (After all, it’s your home!) Whenever you choose to sell, you'll need to notify the investor and send  copies of certain documents related to the sale -- such as appraisals, inspections, title reports, etc. When your sale of the home closes, you will pay the investor the amount you owe  from the escrow.

Question 14

What happens if there is a foreclosure?

Accepted Answer

Because the investor wants the best for the HEI, the investors see foreclosure as a last resort.
Should this become your situation, they ask that you contact them immediately so that they can connect you to relevant resources and strategize together on the best course of action for you and your home.

Question 15

What happens if I get behind on my mortgage payments? What happens if I default?

Accepted Answer

Investor technically has the right to foreclose on your property to protect its investment, but they would much rather see you stay in your home. That's why they will always give you a chance to fix any default. As an investor in your property, they share your desire to protect the equity in the home. In certain circumstances, if you are facing foreclosure by your lender, they might work with you to sell your home in an orderly "non-distressed" fashion which would maximize the sale price, protect the equity in the home, and preserve your credit.

Question 16

Who decides when our partnership ends? Can you force me to sell my house?

Accepted Answer

You always remain the sole owner of your property and can decide to sell your home at any time. After the 10 years to30 years, you will need to either buy out HEI, this can be done by refinancing your mortgage or sell the home.
If you ever find yourself unable to make your mortgage payments, investors may work with you to find a resolution that is best for everyone, which could include the sale of your home.

Question 17

Why does investor require a home appraisal and is it accurate?

Accepted Answer

A home appraisal is a report from a qualified professional that estimates the value of a home. When you buy a home, you will usually hire an appraiser to visit the home, review its condition and characteristics, find comparable properties that have recently sold in the area, and provide both you and the seller of the home with a fair estimate of its value.
Investors will require home appraisals to provide an accurate valuation for your equity sharing agreement. To obtain an unbiased valuation, they use Appraisal Management Companies (AMCs).
AMCs are far-and-away the preferred means for obtaining appraisals in real estate transactions. They provide a “firewall” between financial institutions and appraisers, as required by federal guidelines.
Please also note that the appraisal may return a value in which investor is unable to invest. In those cases a HEi may not be available for you.
Note: after an AMC provides appraised value for your home, investors typically apply a 5.0% Risk Adjustment to account for appraisal uncertainty, and to deliver your funds more quickly.

Question 18

What are the costs associated with an HEI?

Accepted Answer

For the investors HEI, investors will deduct up to a 4.9% transaction fee from your agreement at closing.
Additionally, you are responsible for third-party costs such as appraisal and settlement costs (including title, state taxes, and recording fees). Appraisal fees generally range from $450 to $1,250, home inspection fees typically range from $650 to $1,050 and settlement costs range from $700 to $1,750, depending on your area. Your exact costs will be provided to you prior to closing.
In addition to the standard transaction fee, customers who obtain an HEI are responsible for the cost of their home inspection.  If you happen to have a recent home inspection that meets standard criteria, let us know and consideration in using that one instead.

With most investors, your closing cost are deducted from the HEI proceeds. Meaning, you have " NO OUT OF POCKET EXPENSES"!

Question 19

How does a Home Equity Investment (HEI) differ from a reverse mortgage?

Accepted Answer

Unlike a reverse mortgage, which is only available to homeowners aged 62 and older, our Home Equity Investment (HEI) has no age restrictions. An HEI can provide more or less cash upfront depending on your situation. With a reverse mortgage, you must pay off your existing mortgage at closing, but with an HEI, that's not required. Plus, a reverse mortgage is a loan with interest that increases over time, potentially consuming all your home equity. Our HEI is not a loan and doesn't add debt to your home!

Frequently asked questions