The latest news regarding Lehman and Merrill are not surprising. Still, expecting an impending disaster and enduring a disaster are not the same thing. For some, a pessimistic leaning may take hold and for you… I have great news.
In a recent article in the San Diego Union Tribune by syndicated writer Lew Sichelman, we learn about a growing business in refinance lending: the cash out, no interest, no payment, no loan… loan. That’s right. There are investment companies out there right now loaning cash against the equity in your home. There is no interest rate and no payments because it is not a loan. The company simply gets to share in any equity gain you experience between the time you receive the money and when you sell the home.
There are restrictions, including a kind of pre-pay penalty. You can not sell the home for an agreed to time period (usually at least five years). But there is also freedom: no restrictions on how you use the money. The investment company shares in your appreciation and your depreciation. Of course, if your home goes up substantially, the cost of the money you received can be exorbitant. But you get use of frozen assets right now, which can be pretty handy.
Here’s the marketing gem in all of this: There are plenty of clients and prospects on the sideline right now, desperately wishing they could get in the game. This is one of the best buying cycles I have personally ever seen. The problem: they are house rich and cash poor. Here is a solution and it does not add to their monthly budget or future debt-to-income calculations. Show them how to get that “dead” money out their home and into an income producing property.
HIGHLIGHT: If you think housing is in trouble and things are not going to get better for some time, you can take your equity out now at a cost of: nothing. When you do eventually sell you will still have to pay back the original amount but you will have gained no equity and so the “loan” will have been at no cost to you.
One last thought. This is good news for everyone, optimist or pessimist. Where there is need and the potential for profit, there is innovation. As dire as the credit crunch appears, new innovation and twists on old innovation will continue… as will the real estate industry.
(This post was first published here.)
Filed under: BUYERS, INVESTORS, LENDERS, POLITICAL & ECONOMIC FOLLY, REALTORS, SELLERS , Economy, equity, lending
