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The Future. As home valuations soar, Wall Street wants to take a piece of the future upside in exchange for giving owners cash today. It’s a bet that homeownership will only get more expensive, making home equity one of the biggest untapped markets for investors… and a sign that first-time buyers may need to search for alternative paths to affording the American dream.
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Wall Street is trying to take “home-equity-sharing agreements” mainstream on Main Street.
- Companies like Point, Hometap, Unlock, and Splitero are offering zero-interest lump sum payments to homeowners in exchange for the future value of their houses — so, the more a house appreciates, the more the investment firm will make.
- Rather than make monthly payments on the loan, homeowners pay a lump sum at the end of the contract’s term — anywhere from 10 to 30 years.
- While these deals have been around for decades, investors believe that an era of high-interest rates will make them more attractive than a typical loan.
Considering the explosive growth of home valuations over the past few years, these deals could provide owners with serious cash and Wall Street with serious upside. According to Insider, “between the beginning of 2020 and the third quarter of 2023, US households gained a staggering $12.6 trillion of equity in their homes.”
With a lack of available new homes plaguing America, that equity will likely only increase.
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