Money For the Rest of Us
When to Sell Equity or Borrow: A Guide for Homeowners, Students, and Artists
Sep 18, 2024
Discover the ins and outs of home equity investments versus mortgages, and why they matter. Learn how income share agreements have revolutionized educational funding, offering new possibilities for students. Explore the intriguing world of music royalties, where artists sell their rights for upfront cash, and investors gain opportunities in popular music. Finally, navigate the complexities of equity and debt decisions, emphasizing the importance of understanding terms and contractual fine print.
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Quick takeaways
- Home equity investments allow homeowners to access funds by sharing future home appreciation, posing risks if property values decline.
- Income share agreements offer students a flexible, income-based repayment model for education funding, but face regulatory scrutiny as potential loans.
Deep dives
Home Equity Share Agreements Explained
Home equity share agreements provide an alternative for homeowners to access funds without traditional borrowing methods. Instead of taking out a loan against their property, homeowners can receive a cash payment in exchange for a share of the future appreciation of their home. For example, if a homeowner with a $500,000 house borrows $50,000 through a home equity investment, they may give up 20% of the home's future value instead of making monthly payments. This option can be appealing in a rising market; however, it poses risks if home values decline, as these agreements usually require a portion of the home's value upon settlement, regardless of market conditions.
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