LAS VEGAS (KLAS) — Leveraging home equity: is this smart money or will you shortchange yourself?
8 News Now looked at one alternative option that helped a Las Vegas man in his time of need.
Four months ago, Ron Baldwin and his wife of 28 years, Paula, were looking to refinance their Las Vegas condo when Paula got sick.
“She got cancer, and within three weeks she passed,” Baldwin said. “At least she didn’t suffer.”
Ron was at a loss: two paychecks were now down to one. He was struggling to cover the mortgage and car payments.
“I couldn’t afford to take a loan out on my house,” he explained. “I didn’t know how I was going to pay my bills.”
He started looking at alternative financing options.
People with high amounts of equity who can’t qualify or afford to make payments on a second mortgage or other type of loan typically check out one of these companies: Point, Hometap, Unlock, Unison, Splitero, and Equitychoice.
Baldwin chose Splitero.
“It’s certainly time that people start thinking about their home equity differently,” Splitero CEO Michael Gifford said. “Debt is not your only option.”
Gifford started the company during the Covid pandemic and expanded it to include Nevada this year.
He said his customers typically need the cash to pay bills, cover medical expenses, college costs, care for aging parents, or renovate a home.
The company is an alternative option that lets people tap into their home equity without taking out a loan or accumulating debt.
Splitero gives people cash in exchange for a portion of the home’s future value based upon the agreement made.
“When you sell we’ll have part of that value,” Gifford said. “We wait for any payments until then.”
Experts warn that people should be very cautious about accessing home equity. As with any arrangement, failing to meet the terms of an agreement could lead to foreclosure.
There are fees and potential restrictions, but Ron said it was the right fit for him.
“I think I took about $60,000 out, I paid off all my bills.”
Home equity sharing companies tend to have lower credit score minimums. You typically qualify even if your credit score is below 600.
When you enter an equity sharing agreement, the investment company becomes a secondary lienholder, and there are risks with both appreciation and depreciation of your property.
If your property is worth more, you will have to share that appreciation with the investor.
Conversely, if your property decreases in value, the investor will still be entitled to a return on their investment.
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