Equity for Home Financing

Transcription

1 Equity for Home Financing

2 2 Stimulating sustainable growth in the housing market through ethically priced funding Our EFI product will help generations of consumers redefine home-related debt, empowering them to achieve financial well-being Our company is committed to demonstrating the true value of conscious capitalism in a world where trust is rare commodity

3 THE HOME AS AN ASSET Aggregated home values are $25 trillion, with home equity of $15 trillion (Federal Reserve Bank, 2015) The average person/couple at retirement (age 65) has 77% of their assets in home equity (US Census- 2011) Many Millennials can t afford a home and without alternatives to debt won t be able to benefit from amortization and home price appreciation Sustainable equity based alternatives offer an opportunity to change the current landscape Financial psychology and the role it plays in home ownership and wealth accumulation

4 $15 TRILLION IN UPTAPPED HOME WEALTH 10,000 baby boomers will retire every day from now until 2030 Reverse Mortgages concentrate debt with an accrued and compounded interest rate that is often times a variable rate Home equity is sacred savings generated through the payment of your mortgage and home price appreciation Ignoring diversification risk is a significant problem for homeowners and their financial planners

5 HOME SAVINGS The average person/couple at retirement (age 65) has 77% of their assets in home equity (US Census-2011) The amount of housing debt for retirees in the past 25 years is over 5X the amount of home price appreciation (The Center for Retirement Research) The vast majority of Baby Boomers will need to compromise on their lifestyle in retirement to meet their post-retirement income needs

6 HOME FINANCING Baby Boomer s are equity rich again, GenXer s took advantage of low home prices, and Millennials Strict lending requirements make home financing expensive More than 1/3 rd of US families have less than $1,000 in savings and investments

7 MILLENNIALS AND HOMES For the 1 st time in 130 years, Millennials are more likely to be living with their parents then living in their own home (Pew Research) And yet 94% of Millennials want to own their own home (NAR) Millennials greatest fear is running our of money in retirement citing student loans and unknown Social Security (Bankrate.com)

8 HOW AN EFI WORKS An investor provides a capital advance to aid in purchasing a home or in accessing equity in an existing home In exchange for this equity advance the homeowner shares a portion of the home s lien adjusted future value. Unlike a loan, there is no accrued or monthly interest payment. The repayment is triggered not by time, but by an event: THE SALE OF THE HOME THE DEATH OF THE HOMEOWNER(S) OR PREPAYMENT OF THE EFI

9 Share of HPA $400K HOME PURCHASE EXAMPLE Investor 22.5% Homeowner 77.5% Homebuyer Down Payment (Equity) 10%, $40,000 EFI (Equity Advance) 10%, $40,000 1 st Mortgage 80%, $320,000 20% = 80K DOWN PAYMENT Homeowner gets: 77.5% of lien adjusted home value with only 50% of the down payment Conforming loan may lower interest rate No costly PMI Lower monthly payments = more income to invest EFI Investor gets: 22.5% of the lien-adjusted home value 9

10 Home Value $506,000 $400K HOME PURCHASE EXAMPLE 6 Years Later EFI Investor 22.5%, $41,000 Homeowner s Equity 77.5%, $142,500 EFI (Equity Advance) 10%, $40,000 1 st Mortgage 56%, $282,500 LAHV of $183,500 Assumes home appreciates in value 4% every year for 6 years End year 6 home is worth $506,000 After remaining $282,500 mortgage and $40,000 EFI is paid off, $183,500 of proceeds is split between EFI investor and Homeowner Homeowner gets: 77.5% or $142,500 EFI Investor gets: 22.5% or $41,000 10

11 Homeowner gets 20% of the home s current value $800,000 EQUITY ACCESS EFI investor gets 30% of the lienadjusted HPA upon sale of house Waterfall ofpayouts: 1. Remaining 1st mortgage 2. EFI principal investment and any protected equity* 3. EFI % of LAHV 4. Homeowner s equity Share of HPA EquiFi 30% Homeowner 70% Home Equity 30%, $242,000 Protected Equity; 6%, $48,000 EFI (Equity Advance) 20%, $160,000 Remaining 1 st Mortgage 44%, $350,000 Homeowner s Equity of $290,000 When the combination of a mortgage and the EFI equals less than 70% of the home value, the homeowner is entitled to protected equity on the difference 11

12 Assumes home appreciates in value by 4% every year for 7 years End year 7 home is worth $1,053,000 After remaining $307,500 mortgage and $160,000 EFI is paid off, $523,000 of proceeds is split between EFI investor and Homeowner $800,000 EQUITY ACCESS 7 YearsLater EquiFi 30%, $157,000 Homeowner 70%, $366,000 LAHV of $523,000 Homeowner gets: 70% or $366,000 plus their 6% protected equity of $62,500, totaling $428,500 EFI Investor gets: 30% or $157,000 Home Value $1,053,000 Protected Equity; 6%, $62,500 EFI (Equity Advance) 20%, $160,000 Remaining 1 st Mortgage 28%, $307,500 When the combination of a mortgage and the EFI equals less than 70% of the home value, the homeowner is entitled to protected equity on the difference 12

13 EQUITY VS. DEBT FUNDING INSTRUMENTS Form of Product Payment Form EFI Equity Home Appreciation Reverse Mortgage Debt Accrued and Compounded Interest Minimum Age None 62 Known or Unknown Liability Known Unknown 13

14 FINANCIAL PSYCHOLOGY AND THE HOME How the home is different then any other asset Stress and behavioral changes Understanding hyperbolic discounting and commitment devices

15 WHO BENEFITS FROM OUR PRODUCTS CONSUMERS BABY BOOMERS HOUSING MARKET HOUSING FINANCE AGENCIES INVESTORS New buyers get conforming loans and Access equity and generate retirement Housing growth is safely stimulated and sustained Expanding pool of qualified buyers Finally have direct access to home price reduce debt income appreciation 15

16 EquiFi has done work in the following public sectors 16

17 DO WELL WHILE DOING GOOD EquiFi is a Public Benefit Corporation with a 501(c)(3) non-profit subsidiary Our pricing model ensures fairness for a sustainable means of funding home purchases and equity access Leadership by example, actions speak louder than words

18 The only specialty finance company organized as a Public Benefit Corporation with a 501(c)(3) EquiFi.com