Do You Own A Home? In A Pickle? A Novel Way To Tap Equity.

If you own a home and do not need money to solve any serious financial issues my advice is don't do anything. Carry on with your life and be thankful you did the right things to be financially secure.

But what if you have serious financial problems?

• Say you are behind with your mortgage.
• Your credit is not good enough to qualify to refinance.
• And you had prior liens on your home.
• And you have loans you can barely meet the monthly payments.

To make matters worse you are retired and living on a fixed income.

The only positive situation is you have significant equity in your home, If there was only a way to access some of that equity to help you out.

Can you relate to this situation?

What Can You Do?

We happened to be in the above situation and felt trapped. That was one of the reasons I was looking for money making opportunities. After falling into many rabbit holes it was my good luck to find Wealthy Affiliate.

There is that four netter word again I wrote about in my previous blog here.

If you have been in a similar situation did you find a way to get cash out of your home? If you would like to share how you did it here that would be awesome. It could help others.

I'd like to share what my wife and I just did.

Equity Investment Option

We looked into reverse mortgage a few times, But each time for one reason or another we didn't qualify, This was very discouraging as we felt this was our last resort.

About a year ago I started researching the Internet for alternate options to tap the equity in our home. We are retired and have no intention to sell our home. But we are in danger of having it foreclosed if we fall further behind in our mortgage payments.

A Solution Through Affiliate Marketing

Once again luck played a role in finding a solution. I came across a website of an affiliate marketer that promoted an unusual option to tap the equity in our home.

Can I make a point here? You will see me using the word luck a few times. If you read my previous post about luck, I presented one definition of luck as being a state when preparedness meets opportunity. I don't really believe in luck as some random occurrence except in lotteries and prize drawings. But it is expedient when used in the above definition.

The preparedness originates from becoming a student in affiliate marketing. Hence, when my online search led me to a fellow affiliate marketer who was promoting a novel solution, I had an open mind. I was prepared to check this option out and not dismiss it as a scam outright. If I wasn't involved in affiliate marketing that would probably have been my reaction resulting in a lost opportunity.

Home Equity Investment (HEI)

This is the name of the novel financial instrument that helped us find a solution. I will do my best to explain how it works in a way that can be easily understood. If you are already familiar with what an HEI is, let me know what you think?

Unlike a loan that has to be paid back using monthly payments over a fixed time, the cash advanced to the homeowner doesn't have to be paid back until the home is sold, or at the end of the term of the agreement. The homeowner pays the investor the original cash advanced plus an agreed to percentage of the increase in home value.

What happens when the home drops in value? The investor also participates in the loss. It is even possible that the investor can loose their investment entirely if property values plummet significantly.

In cases where the home increases in value to an excessive degree, the agreement has a maximum cap that limits the total amount of equity the homeowner has to pay the investor.

This is a win-win situation for the homeowner as well as the investor. The homeowner has protection if the property rises in value to a very high degree. And protection also applies if the home falls significantly in value.

The investor is also protected by the use of the risk adjusted home value compared to the appraised amount. Namely, 25%.

One of the qualifying factors is the home needs to have at least 50% equity.

The Catch

You may be thinking this sounds too good to be true. There is a catch. Since the investor takes on significant risk, this form of investment does have a risk protection clause.

The base price that any appreciation or depreciation is used to calculate the funds paid back to the investor is set at 25% less than the current appraised value.

That is why I stated right at the beginning if you do not need to tap the equity of your home do not enter into an HEI program. We have to part with a significant amount of equity increase when we sell our home.

As retirees, we consider this home our forever home. Hence, it will be our son who will have to meet the agreement when he inherits the home after my wife and I both are no more.

I can assure you he will be very happy to get anything from us as he is well aware of our financial plight. In fact, one of the reasons we are in this situation is the extent we have helped him financially during hard economic times especially to protect his children.

The Huge Benefits To Us

We are still legally the owners of the home. The investor does have a lien on the home to protect their investment.

One of the requirements of this agreement is that the existing liens on our home as well as the back mortgage payments has to be paid from the cash advanced to us.

The company advised us this would be a good time to negotiate a reduction of the liens with the respective creditors. We were able to do this and lower the liens to up to 50% less than what we owed.

Fortunately we have enough equity in our home to give us significant cash back to pay off our other loans and allow us to start of with a clean slate. With no credit card and car payments we can keep much more of our fixed pension income.

The nice balance that will be deposited into our bank account will give us a financial cushion we didn't have before. No more NSF fees from the bank in our future.

What If The Economy Tanks?

If our home value drops significantly below the base price I mentioned above, the cash we owe the company will be less than what they advanced us. This means they will get a negative return on their investment.

That is their risk. Hence, the lower base price set for the home to calculate both appreciation and depreciation.

We have the option of buying them out anytime with no prepaid penalty. In this kind of scenario we could get out of our agreement by paying them back for LESS than what the company advanced us.

Income through affiliate marketing combined with savings could provide us with the funds to do just that.

What If The Economy Soars?

If the value of our home shoots up, we can refinance and buy out the investor per our agreement. In this case we all benefit.

However, the best scenario is to get out of our agreement when the economy tanks and then benefit 100% when the economy booms again when the economy soars.

The Pandemic could make that happen if it gets out of hand. That was one of the reasons we were on edge hoping that the deal would go through now, while the value of our home is higher than it has ever been.

A Sweet Outcome

We signed the papers on the 30th. There were so many roadblocks along the way like a three-month hold when the Pandemic started as well as the time it took to strike a deal with the lien holders,

The 30th was the last day to sign before the deal would expire. Talk about getting down to the wire.

November 3rd will have a special significance to my wife Mary and I other than the election day. That is the day the funds will be deposited into our bank account.

Early voting in California started today. We voted using the new fangled electronic system. We did this right after we signed the HEI agreement at a local coffee shop that had outdoor dining.

It was a beautiful day!

A Final Note

I applied to become an affiliate of this company just before I wrote this article. You bet I will be writing a review of them on my website, once approved,

In this instance, the review will be using actual experience.

Isn't it uncanny how affiliate marketing played a role in this story like bookends?

If ever there was a case where luck played a role this was it. And I don't mean random luck. This is the luck we created ourselves where preparedness met opportunity.

I'd love to hear what you think of this adventure.

Edwin

I got the following note when I tried to publish my article, Strange when it is my story.

Your blog content needs to be unique, original, and not copied from anywhere online. We found that your blog content is already published on other website(s).

After I added the above note the WA system accepted my article as being unique. Go figure ha!