Are You Ready to Share?

March 13, 2018

Playgrounds are the optimal place to learn about human behavior; you can observe how children interact with one another, how parents supervise them, and how childcare professional perform their duties. Of course, among the peculiarities and the many different styles, you can detect patterns and commonalities. One of them relates to the very act of sharing.

 

On one hand, many young kids generally like to benefit from others’ belongings but are not equally excited when they are asked to share their own. They get more comfortable sharing as they grow older, so long as their counter-party is respectful and makes good use of what they have been entrusted with. On the other hand, parents and childcare personnel – regardless of age, origin and background – almost always encourage sharing. They do so because they want to set an example and because they have learned from life that sharing is beneficial to the person who receives and feels good to the person who gives. We all ultimately come to understand that we aren’t what we own; we’re what we give.

 

Now that we have set a general framework of thought, let’s see how sharing impacts home-buying, described as the process which leads to becoming a homeowner. Let’s use an example of a Millennial couple looking to establish themselves in the part of town they chose to live. Jane and Joey are in their late 20’s; they are married, they each recently received their graduate degree, and of course they have student loans to repay. Luckily, they both enjoy well-paying jobs and are looking to buy a place before their first baby arrives! These exciting times are a bit shaded by the preliminary results of their search. Real estate prices in the area they like are much higher than they thought; their down payment availability is somewhat limited, and their monthly budget can’t be stretched too far because of current expenses and future ones relating to their growing family.

 

Jane and Joey currently rent a 1-bedroom apartment for $1,700/month. They have gone to many open houses and the price range they think they can afford is around $400K. However, even with low interest rates at 4%, and with barely 10% available to put down, they still won’t be able to afford the mortgage + PMI ($1,718.70 + $187.50 = $1,906), let alone the other expenses relating to the home, such as homeowner’s insurance and property taxes ($416.67 + $116.67 =$533.34). They are facing a dilemma and like them, many other young adults.

 

EquiFi is the perfect partner for them: by co-investing 10% of the down payment with the Equity Funding Instrument (EFI™), Jane and Joey can qualify for a conforming 80% mortgage, reduce their home payments by approximately 20% ($1,527.73 monthly payment + interest) and still have a budget for other home-related fixed costs. The equity advance from EquiFi, in exchange for a portion of the future value of the home, allows this couple to buy a place that fits their needs and allows them to start accumulating wealth in the home. For putting down 50% of the down payment, the EFI™ investor is entitled to ~25% of the value of the home when they sell it, and Jane and Joey don’t have any payments to make on the EFI™, as it’s an equity investment. You see, equity sharing is not just beautiful because of the idealistic aspect but obviously, and even more so, because of the true impact and benefit it can provide consumers. Thanks for reading. See you next week!

 

 

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Author of the Post

Laura is a member of the EquiFi leadership team.

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