EquityChoice is a new type of residential second mortgage (called a Shared Appreciation Mortgage) that is designed to give homeowners access to a portion of their home equity wealth with more flexible terms than traditional home loans and lower costs and more safeguards than non-regulated equity investment financing options. 

You own a home worth $1,000,000 and would like access to $100,000 in immediate funds.With EquityChoice, you’ll access funds and have no monthly payments for 10 years. At maturity, you’ll owe the principal, fixed interest (4.5% compounded monthly) + Shared Appreciation.

Let’s look at what your equity position would be and how much you would owe at the end of your EquityChoice (excluding what you might still owe on your primary 1st lien) loan term depending on various housing market outcomes using the example scenario provided.

Let’s say the Index value of homes in your region depreciates by 2% annually and is worth $817,073 when it’s time to pay off the loan. You’ll owe $156,757 and you’ll still have $660,316 in home equity remaining.

Now, let’s assume the Index value of homes in your region doesn’t change, you’ll only owe $171,757. The $15,000 in Shared Appreciation you’ll owe equates to the difference between the Future Index Value and the Initial Agreed Value. $1,000,000 – $950,000 = $50,000 *30% = $15,000. Furthermore, you will still have $828,243 in home equity.

Let’s say the Index value of homes in your region increases by 2% annually to $1,218,994, you’ll owe $237,455 and will still have $981,539 in home equity remaining.

What if the Index value of homes in your region goes up significantly by 6% annually to $1,790,848. Using the same math, you would owe $409,011. However, since EquityChoice has a Capped Payoff Amount, the amount you owe is capped at $347,825 (as of 12/21/23). Instead, you will owe just $347,825 and will still have equity of $1,443,023 remaining.

Note: The Capped Payoff Amount for this loan in CA was $347,824 (as of 12/21/2023)