Inflation and higher interest rates make it more difficult for homeowners to absorb the costs associated with traditional equity financing.
Home equity investments offer a lesser-known but innovative way to tap into equity. They allow homeowners to get cash upfront in exchange for a share of their home’s future value, and the home secures the investor’s interest. Qualification requirements differ from those of traditional refinancing, and homeowners do not need to worry about monthly payments or interest charges with an equity investment—just appraisal costs, origination fees and closing costs. To settle the investment, homeowners buy the investor’s share after a set period of 10 to 30 years or whenever they decide to sell or refinance their home before that time.
Unlike financing options that include specific criteria for how the funds are used, home equity investments allow homeowners to use the funds for any reason, making it a flexible option. Some use the cash for small business opportunities, diversifying their portfolio, eliminating debt or paying for college tuition, but the possibilities don’t stop there.
This article originally appeared on WealthManagement.com. Read the article here.