Consumers should be aware of a relatively new type of financial product called a Home Equity “Investment” (HEI), also referred to as a shared appreciation or shared equity product, according to the California Department of Financial Protection and Innovation (DFPI).
These products are often marketed as a way for homeowners to access cash without taking on additional monthly payments. However, in exchange for upfront funds, a borrower must pay the HEI provider a share of the home’s future value. This amount must be repaid later as a lump sum and can become very expensive if your home value increases. Although HEIs may appear flexible, they are complex agreements that can lead to significant or unexpected costs.
Before entering an HEI agreement, consumers should make sure to review all terms, including how the provider’s share is calculated, when repayment is required, and what fees or charges apply. Some HEIs include limits on the provider’s potential returns, but these caps may be set high enough that they offer little real protection.
“If you are considering an HEI, compare it to alternatives that could meet your needs such as home equity loans, home equity lines of credit (HELOCs), or state and local assistance programs, and consider consulting a trusted financial professional,” the DFPI states.
You can learn more about HEIs here and via the Consumer Financial Protection Bureau.
If you have concerns with an HEI or shared appreciation product, please submit a complaint at dfpi.ca.gov or call (866) 275-2677.
For more information, email Lisa Quaranta.
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For more information, email Lisa Quaranta.
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