Financial emergencies such as medical expenses, car repairs, unexpected fines, and even emergency pet care can easily ruin your financial plans. As rising costs and fears of a recession breed money worries, the average American must weigh his options carefully.
While an emergency fund is a good insurance against financial shocks, it’s not always an option. Only 44 percent of Americans have enough money to cover a $1,000 emergency expense, while just 47 percent have more rainy day savings than credit card debt. Even so, repeated crises can quickly wipe out your savings. While taking out a personal loan or credit card debt can pay your bills now, fees and interest rates can be a major hurdle.
Meanwhile, homeowners with a stake in their home have another option. By cashing in on your home with equity loans, equity loans, and equity sharing agreements like Unlock, you can avoid paying high interest rates when financial times get tough.
How home equity can be an option for contingencies
Home equity is the proportion of the home that you own through a mortgage; it is essentially the difference between the value of your home and the amount you owe. The more you pay off your mortgage and the higher the market value of your home increases, the more equity you have. There are several options to earn on the value of the house.
Cash-back refinancing is a type of remortgage that allows you to replace your current mortgage with a larger loan in exchange for cash taken from your home equity. Another option, the traditional home equity loan, allows homeowners to take out a lump sum of cash against their own equity to be paid back later. On the other hand, a home equity line of credit (HELOC) has flexibility in how much money you can withdraw. It should be noted that real estate and HELOC loans have separate repayment terms and interest rates compared to your original mortgage.
The fourth option is to conclude an agreement on the division of shares. Share-sharing companies will buy back some of the house’s shares in exchange for a larger share of the shares in the future. Homeowners either buy back their equity after an agreed period of time or pay a percentage of the amount they later sell the house for.
Equity agreements can be attractive to homeowners who are looking for alternative ways to raise capital from their home but may not be able to afford higher or additional monthly payments. In addition, the process can be comparatively faster and have lower loan requirements while avoiding high interest rates.
What to look for when withdrawing capital
While home equity can be a financial cushion, don’t treat your home as a windfall. Cashing out your capital does not happen instantly and comes with fees, requirements and other factors to consider.
Most Equity Loan, HELOC, Refinance and Sharing requirements require you to have more than 20 percent equity in your home, while some require 20 percent equity to remain after cashing out. These options have income requirements and credit score minimums.
In addition, cash-out refinancing replaces your previous monthly payment and term and starts over, while home loans and HELOC require a separate payment in addition to your main mortgage payment each month. For these options, the total amount you pay for your mortgage each month will increase. Other refinancing options, home equity loans, and share sharing agreements will give you a lump sum of cash. At the same time, HELOs are flexible in how much money you withdraw.
Finally, refinancing, mortgage loans and HELOC may take several weeks to be approved. Since they are essentially loan applications, you won’t be able to access your money right away. All forms of capital withdrawals also come with a closing fee.
Comparison of access to capital
|Equity requirement||20 percent capital||from 15 to 20 percent of equity||from 15 to 20 percent of equity||20 percent capital|
|Min. credit rating requirement||Varies – usually 620||Mid 600s||Mid 600s||500|
|Maximum loan amount||80 percent capital||80 percent capital||80 percent capital||10 percent of the total value of the house|
|Approval time||45 to 60 days with a 3 day waiting period||from 14 to 42 days||30 to 60 days||10 to 30 days|
|Pay||total amount||total amount||line of credit||total amount|
|Interest rate||fixed or variable||Corrected||Variable||Nobody|
|Repayment terms||Single monthly payment from 15 to 30 years||Additional monthly payment from 5 to 30 years||Variable additional monthly payment for 20 years||No monthly payments; the owner returns the agreed percentage of the value of the house|
|Fees||from 3 to 5 percent of the loan||from 2 to 5 percent of the total loan amount||from 2 to 5 percent of the total loan amount||3 percent of the total loan amount, other closing costs|
Why Access Equity Through Sharing Agreements
Share-sharing agreements can be a viable option for homeowners who need quick access to cash with less demands. While there are downsides to capital sharing, here are a few reasons why this option might be right for you.
Home equity stocks often have lower requirements than refinancing, home equity loans, or HELOCs. If your credit score has deteriorated due to piling up of bills or if you don’t meet the income requirements for traditional cash-out methods, a home equity stake can still free up your money while you recover.
Faster withdrawal of money
Equity shares can get money into your hands faster. While it still takes time for an application to be approved and a home to be verified, promotions can offer faster withdrawals than traditional capital access methods – sometimes as little as 10 days – with no waiting periods.
No monthly payments
One of the biggest benefits of a share sharing agreement is that there are no monthly payments. Refinancing, equity loans, and HELOC can hit your wallet with increases or additional monthly payments. However, home equity shares only require payment at the sale of the house or at the end of the division agreement, giving you the opportunity to get back on your feet before you pay.
Avoid raising interest rates
You don’t have to pay interest on a share when it’s time to sell your home or buy back a share. This means that even if interest rates rise, your payment will remain the same.
How Unlock quickly turns capital into money
Unlock is a stock exchange company that allows you to quickly and efficiently access your capital with lower requirements and no monthly fees.
Unlock works by buying back a future share of your home’s equity in exchange for immediate cash. When the promotion starts, you can access between $30,000 and $500,000, depending on the value of your home, up to a certain net worth threshold. In return, Unlock receives most of your equity at the end of the contract or the sale of the house – so if you sell 10 percent of your total equity at the beginning, Unlock will receive 16 percent at the end of the term.
Homeowners can pay flexibly for Unlock. You can sell your home and give an unlock amount a fraction of the sale price. You can also redeem the share before the expiration of the agreement, either in installments or in a lump sum.
Unlock may offer a more flexible path to financial freedom if you’re stuck in a stalemate. If an unexpected medical bill has drained your reserve fund and hurt your credit score, cashing out through Unlock means you can pay your bills and not have to worry about qualifying for refinancing, paying high personal loan rates, or juggling increased payments. .
Also, if the value of your home increases due to home improvements, you can still pocket the difference when you sell it.
Freeing up cash now can also pave the best path for your future. When you lose your job, the cash from your wealth shouldn’t just pay the bills – you can also use it to continue your education and build a higher paying career.
With these benefits in mind, see if Unlock is right for you. If you have at least 20 percent equity in your home and a credit score of 500 or more, then it might be worth looking into if you qualify.
While a financial emergency can add a lot of stress to your life, it’s not the end of the world. Your homeownership can give you an extra layer of protection when things go wrong, but keep in mind that it should not replace having insurance or an emergency fund when it comes to preparing for a financial emergency.
Whether it’s a new baby, a car accident, or paying off your credit card debt before the rate increases, Unlock can provide you with a quick and easy way to access your home’s wealth, freeing you from future financial fear.