Choose a Home Equity Investment, Home Equity Loan, Home Equity line of Credit

Qualifies for Home Equity investment

Home Equity Loans & Lines of Credit

We have all heard of HELOCs, the Home Equity Line of Credit.  Many real estate investors know about Home Equity Loans. But not many have heard of Home Equity Investments?  The Home Equity Investment (HEI) is an equity investment and not a loan. There are many advantages of the Home Equity Investment versus the Home Equity Line of Credit  and Loans. I learned of HEI’s about 4 to 5 years ago.  I thought is was a unique offering back then, but there was a very limited market as program offered was very limited. Equity financing of residential real estate has evolved and today there much better offering, with more options that would appeal to many more Real Estate Investors and home owners looking for funding.

To understand Home Equity investments we must first understand  Home Equity Loans and Lines of credit. Simply a lender, usually a commercial bank, makes a loan, a first or a second mortgage, against the equity in your property.  This is a loan that requires the borrower to qualify with acceptable income and acceptable credit. The Home Equity Loan is a fixed loan amount, with a fixed rate, for a fixed period of time. Therefore a HEL is a loan against the equity in your property. The Home Equity Loan is a good relatively low cost way to get money to invest in real estate if the investor lives in a home with substantial equity that they can use. Even better than a Home Equity Loan is a Home Equity Line of Credit, or a HELOC. The HELOC, is a line of credit versus a loan and has the advantage of no payments or interest charges when there are no funds in use, plus the investor can use funds pay them down and use them again. Effectively, have funds to use and not paying for the use of those funds if they are not in use.

Qualifies for Home Equity Investment

Home Equity Investment

A Home Equity Investment is neither a loan or a line of credit. It is as the name implies, it is an equity investment. With a Home Equity Investment there are no monthly loan payments and there is no fixed rate of return.  The home equity investor is making an investment based on the potential growth in equity of the home they invest in.

With a HEL the borrower and the lender know exactly what the cost to use the lenders money is. With an HEI the cost is a percentage of the appreciation of the equity in the home. For instance if the home appreciates $100,000 in value from the time of the equity investment the investor would receive a percentage of that increase in value as the return on their investment, at the time the home is sold or refinanced. With any equity investment, there is the risk of the investment losing value. When an investment loses value it depreciates. Therefore the home equity investor has a chance to lose money.

This may seem a little complicated and risky for the homeowner (Real Estate Investor) and the home equity investor, but there are reasons why a Home Equity Investment might be a great option for a Real Estate Investor.

The big advantage today is the Home Equity Investment works for owner and non owner residential one to four unit real estate. And the investment qualifications are not based on credit score, or income and they can go for up to thirty years. This is also good for investors who do not want to risk their personal residences as collateral for their real estate investment business. Currently, these are the only states the Home Equity Investment is offered CA, CT, OR, WA, MA, CO, NJ, VA, DC, FL, NY, MD, PA, IL, MN, MI, AZ, NC. The property must also be in an urban or suburban area. The program is not available in rural locations.

Qualifies for Home Equity Investment

Home Equity Investment or HEL or HELOC

There are advantages of each program for Real Estate Investors. Any Investor with substantial equity in real estate and they need funds to help build their business, there is no one right option. Weigh the pro’s and con’s of each option and make an informed decision. HEI is another financing tool in your real estate investment business arsenal.

The trained professionals at FBC Funding can help you make the right choice for your real estate investment options.

For more information email Louisj@fbcfunding.com or call 888-848-3114

You can also complete the quick quote form.