Limited Equity Share Program

Thinking Differently Leads to Out of the Box Solutions

Limited Equity-Share programs enable you to convert a portion of your home equity into
immediate cash that you can use for any purpose.

What they offer is unlike anything you have seen before. Limited Equity-Share invests alongside you in your home. It’s called a home ownership investment. Because it’s an investment and not a loan, there are no monthly payments on the money provided. In fact, there are no payments at all until you sell your home – up to 30 years later.

Instead, Limited Equity-Share hopes to earn a return on its investment from a share of the change in value of your home from the time they invest to the time you eventually sell.

How It Works

They partner with you by providing you with a cash-payment today from 5% up to 20% of your home’s current value.

You make no payments until you sell your home. They are your partners, but you are the sole owner of your home. And like any homeowner, you can sell your home at any time you choose

When you decide to sell, you make a single payment to them from the sale proceeds. If the value of your home has increased, the payment will be more than we originally invested and they will make a profit. If the value has decreased, they will typically receive less than they invested and incur a loss. It’s that simple.

What About Reverse Mortgages?

Limited Equity-Share programs are also not a reverse mortgage. With a reverse mortgage, your home equity may decreases over time. With Limited Equity-Share, all of the equity you have in your home at the time you enter the agreement remains yours. All a Limited Equity-Share program does is converts a portion of it to cash for you.

Also, while reverse mortgages are limited to homeowners 62 years old and up in their primary residence, Limited Equity-Share programs are available to homeowners on primary residence, secondary homes and investment properties up to four units regardless of age. In addition, programs are available for non-owner occupied residential properties.

“These programs can be an effective way to hedge against declines in house prices. This tool provides an opportunity to preserve capital and reduce risks of home ownership without selling your house.”
--Investopedia.com--

Home Owner Advantages

Because Limited Equity-Share is not a loan it offers significant advantages over debt-based home finance programs.

Home equity loans or home equity lines of credit provide access to cash, but require a monthly payment, typically have a variable interest rate, and frequently have a ten-year term.

In contrast, Limited Equity-Share has no interest rate, no monthly payments, no negative amortization and no accrued interest. With Limited Equity-Share, you control the length of the term by deciding when to sell your home, subject to a maximum term of 30 years.

Who Is It Good For?

If you have significant home equity, plan to stay in your home for at least 12 months and need or want cash right now, you should consider a Limited Equity-Share program.

The cash you receive can be used for any purpose. Imagine remodeling your home, paying off credit card or other debt, making a down payment on a vacation home or rental property, funding long term care insurance, starting a new business, taking a dream vacation, paying for college, helping a favorite charity or simply spending the money as you would like to make your life more enjoyable. It is totally up to you.

Most American homeowners have the majority of their wealth tied up in their homes. Traditional investment advice counsels against putting all of your eggs in one basket.

Limited Equity-Share programs can be a smart way to diversify your assets and give you some peace of mind.

Real Stories From Real People

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"Thank You" isn't enough!
I was this close to having to declare bankruptcy!
--Client Bill T, Los Angeles, CA

Call Marc: 310-447-5266
or Email Marc: [email protected]

What Kind of Properties Apply?

Limited Equity-Share programs are available for single-family detached homes, townhomes and certain types of condominiums. The home should be your principal residence, although some vacation properties may qualify.

In addition, Reverse Your Thinking® Mortgage has Limited Equity-Share programs for owner or non-owner occupied residential investment properties of all kinds. Up to four units can qualify with repayment terms limited to 10 years.

What's the Catch?

There is no catch. Clients sometimes ask, "How we are able to offer homeowners money with no monthly payments for up to 30 years?"

Unlike banks or other lenders who look for short-term profits, Limited Equity-Share investors are large pension funds and endowments that seek longer-term real estate investments.

What this means to you is immediate cash — without a payment until you decide to sell. Better yet, the cost of the money is paid for by the appreciation, if any, on your home.

Wills & Trust

Limited Equity-Share programs allow homeowners to hold title to the property in the name of trustees of a revocable inter vivos family trust if all trustees sign the agreement.

Whether you hold title to the property in trust or in your own name, if the Limited Equity-Share program is still in effect upon your (and your spouse’s) passing, your heirs are required to end it by selling the home or by repurchasing the agreement.

“This is a godsend—it has allowed me to pay down my debt and start an education fund for my daughter.”
—Client, Ron D., Daly City, CA

“ I was able to generate income by converting my home equity into cash with no debt and no monthly payments. Best of all, they allowed me to stay in the home I love.”
—Client, Bev R., Moraga, CA

“Limited Equity-Share was a wonderful tool for me to be able to have money to put back into my home without having extra payments.”
—Client, Shelly W., Seattle, WA

The Limited Equity-Share Process

The Start of the Process

At the start of the Agreement, they analyze your financial history by obtaining a credit report and reviewing other information. If that meets their criteria, the fair market value of your home is established by getting an appraisal from an independent, third party appraisal firm. We call this the Original Agreed Value. The appraisal also helps determine the condition of your property. They also typically require a property inspection to verify the condition.

You decide what their share of the future change in value will be. Their share typically ranges from 20% to 70%. The percentage is entirely up to you and will vary from situation to situation. The larger the percentage you wish to share, the more cash you can get from Limited Equity-Share programs.

Based on what they learn about your property and your financial history, they determine if you meet all the qualifications and, if so, how much cash they can offer you. They then present you with a written offer detailing the terms and the amount of the Limited Equity-Share payment. You carefully review the terms and conditions of the offer and decide if it is right for you.

Reverse Your Thinking®Mortgage urges you to review the Agreement and all of the information provided with your legal, tax, estate planning and financial advisors. If you have adult children or other heirs, we urge you to talk with them as well. We want you to be sure the Limited Equity-Share Program is right for you. If you decide to proceed, they will schedule a closing where you sign your Agreement documents, and then you receive the cash payment.

During the Process

During the term of the Agreement, you are free to use the cash payment as you wish. You make no monthly payments of any kind. Simply live in your home or vacation property as you have, pay your mortgage, taxes and insurance and maintain your home in good condition.

The End of the Process

The Agreement typically ends when you decide to sell your home or when you and your spouse both pass away. At the end of the Agreement, they will typically receive a payment that is based on the value of your home at that time. That value, which we call the Ending Agreed Value, is typically equal to the Sale Price when you sell your home.

The change in value of your home during the term of the Agreement is equal to the difference between the Ending Agreed Value and the Original Agreed Value. Their return on our investment is determined by the change in value of your home.

Their return on our investment can be positive or negative. If your home increases in value during the term of the Agreement, they will make money on their investment. If your home decreases in value during the term of the Agreement, they will typically lose money on their investment. The maximum amount that they can lose is the amount of their original investment, which is the cash payment you received at the start.

Once they receive the amount payable to us at the end of the Agreement, they no longer hold an interest in your property, and the agreement ends.

In conclusion, the Limited Equity-Share program is very straight-forward. The more you know about Limited Equity-Share programs, the better you’ll be at deciding if it is right for you and your family.

We also urge you to speak with your financial advisors and family about them so they can participate in your decision. Also, we at Reverse Your Thinking® Mortgage are available to conference with you and, your advisors and your family and to answer any questions you may have about Limited Equity-Share Programs.

Call Marc: 310-447-5266
or Email Marc: [email protected]

Additional Features of Limited Equity-Share

The following outlines some of the additional features of Limited Equity-Share programs that you need to understand so you can make a fully informed decision.

Expenses You Pay When You Sell Your Home

When you sell your home, you are responsible for paying all costs associated with the sale, including brokerage commissions.

You are also responsible for paying off your mortgage and any other liens you might have on your home. Limited Equity-Share programs have no impact on this — you would have to pay these costs with or without a Limited Equity-Share program in place.

If the proceeds from the sale are not sufficient to pay all of these costs, plus the amount payable to the Limited Equity-Share provider, you are required to make up any difference.

“I was able to tap my home equity without the burden of a monthly payment, and now I don’t have to worry about all of that accruing interest.”
—Client, Bernie B., Novato, CA

Remodeling Adjustment

Remodeling can increase both your enjoyment of your home and its value. Many clients use the cash from their Limited Equity-Share Agreement to pay for home improvements such as a bedroom addition or new kitchen.

If you remodel your home in accordance with the provisions of the Agreement and any laws and permit requirements that apply, you can request that they make a Remodeling Adjustment when performing the calculations to determine the amount payable at the end of the Agreement.

This adjustment allocates 100% of the increase in your home’s value due to the remodeling to you at the end of the
Agreement, so that the provider does not share in the increase in value attributable to your remodeling project in any way.

It is important to note that the cost of your remodeling project is not used to determine the amount of the Remodeling Adjustment. It is based on the portion of your home’s value that is attributable to your remodeling project at the time you sell.

Remodeling projects frequently increase the value of your home by an amount that is substantially less than what the remodeling cost you. For example, adding a new bedroom and bath may increase the value of your home by 80% of the cost of the project. On the other hand, adding an in-ground pool might only increase the value by 10% of its cost.

An appraisal by a provider-approved independent third-party appraisal firm determines the amount of the Remodeling Adjustment.

Short-Term Financing

The 10-year Limited Equity-Share Agreements are encouraged if short-term financing is a goal. Reverse Your Thinking® Mortgage encourages inquiry into this plan if your need is only for 1 or 2 years. The providers’ return on investment under this program encourages the funds to be quickly repaid and put out again.

Special Termination

Beginning on the third anniversary, you have the right to end your 30-year Limited Equity-Share Agreement without selling your home by requesting a Special Termination.

To do this, they obtain an appraisal from an independent third-party appraisal firm to determine the value of your property. Typically, you will make a payment to the Limited Equity-Share provider equal to the amount they originally invested in your home plus the profit, if any, they would have made if you had sold your home for the appraised value. Upon receiving the payment, the Agreement will end and the provider will no longer hold an interest in your property.

However, if you believe that you will definitely want to terminate within the first 36 months when you first apply for the Limited Equity-Share program, than a 10-year repayment Limited Equity-Share Agreement may be a better solution. This is especially important to applicants who need short term funding, like small business owners.

Deferred Maintenance Adjustment

During the term of the Agreement, it is your responsibility to maintain your property in good condition, subject to normal wear-and-tear. If you do not, when the agreement ends the value of your property will most likely be less than it would have been if it had been properly maintained.

When this is the case, a Deferred Maintenance Adjustment may apply when calculating the amount due to the provider. Since the loss in value would be due to your failure to maintain the property, the Deferred Maintenance Adjustment allocates all of the loss in value due to improper maintenance to you, so that the provider does not share in it.

For example, if you decide to sell your home 20 years after entering into a Limited Equity-Share Agreement and the value of the home is $30,000 less than it should be due to extensive termite damage, they would have the right to make a Deferred Maintenance Adjustment when calculating the amount payable to them. This adjustment would allocate the $30,000 loss in value to you, since your action (or inaction) caused the loss in value, rather than market forces.

The amount of the Deferred Maintenance Adjustment is determined by one or more third-party appraisals, inspections or repair estimates. Providers are committed to a fair process to determine the appropriate adjustment.

30-Year Term Financing

The 30-year Limited Equity-Share Agreements are not intended to be a source of short- term financing, and Reverse Your Thinking® Mortgage does not recommend it for anyone who does not intend to remain in their home for at least three years. The providers’ return on investment comes only from appreciation on properties in which they invest. Appreciation takes time. For this reason:

› Your right to request a Special Termination only begins after the third year anniversary of your Agreement.

› The Remodeling Adjustment is not available until after the third year anniversary of your Agreement.

› If you sell your home during the first three years of the Agreement and your home’s value has declined, the provider will not share in the loss.

What to do next:
Call, send us an email or request a quote for more information.

We at Reverse Your Thinking® Mortgage are available to conference with you and, your advisors and your family and to answer any questions you may have about Limited Equity-Share Programs.

There is no obligation, cost or pressure. West-Cal Reverse is committed to openness, transparency and honesty in all aspects of our business. Let's collaborate over coffee.

Call Marc: 310-447-5266
or Email Marc: [email protected]

The Alternative to a​Home Equity Loan or a Reverse Mortgage