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What You Need To Know About Home Equity Investments

What You Need To Know About Home Equity Investments

Estimated reading time: 3 minutes

There’s a new asset class gaining popularity on Wall Street: your home.

No, investment bankers aren’t going to be knocking on your door trying to buy your property. Instead, some emerging companies, like the Venture Capital-backed Point, are offering cash up front in exchange for a share of your home’s appreciation down the road. This type of deal is known as a home equity investment (HEI).

Homeowners’ equity has been surging since the turn of the decade. In the third quarter of 2023, the Federal Reserve estimated American homeowners had a collective $32.6 trillion in equity, which can vary based on each market. But homeowners can’t access this wealth unless they’re selling their place or taking out a home equity loan. That’s where HEI comes in.

Hefty Risks

Experts warn that HEI contracts are often complex and could lock homeowners into conditions they don’t fully understand. For example, if the home fails to rise in value, it could lead to complications with the deal.

As usual when it comes to investments, there’s no free lunch, and there’s risk everywhere. The key is to know what risk is right for you and your finances.

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