Wealth Inside and Out

March 20, 2018

Being ill prepared for retirement, unfortunately, is a very common scenario among those who are approaching retirement or are contemplating what retirement might look for them. Lacking diversification and over-exposed, many Baby Boomers may not realize that maintaining their lifestyle may be difficult once they leave the workplace. Home-equity overweight is one factor that negatively affects diversification and overall portfolio risk management; being illiquid and exposed to home price fluctuations with excessive wealth concentrated under the roof, is indeed both a limitation and a risk.


On our last blog post, we looked at an example of how equity sharing can impact home-buying; on this post, we are going to describe how equity sharing can help current homeowners. Let’s use an example focused on a baby boomer couple.


Lisa and Tom are in their mid-60s, living in a nice suburban area near a major city. Lisa is a housewife and Tom has recently retired from a bank administrative job. Although they have lived comfortably throughout their marriage, they realize that the net worth accumulated outside the home is just a third of the wealth accumulated inside the home. Their mortgage is nearly paid off and their home is now worth around $800,000. Eager to maintain their lifestyle, but to also leave an inheritance to their kids and grandkids, they are exploring options for better managing their wealth. They would qualify for a reverse mortgage and have considered home equity loans to monetize some of the equity they have built in their home. But Tom doesn’t like the accruing and compounding interest on the reverse mortgage, and Lisa doesn’t want to write another mortgage check every month. They are consulting with their financial advisor on ways to create liquidity and manage their portfolio.


EquiFi is the perfect partner for them: Lisa and Tom receive 20% of the home’s current value ($160,000) in exchange for giving EFI™ Investor 30% of the value of their home when they sell, die, or prepay. They preserve the estate value, have no monthly payments and no current/accrued interest. Prior to needing this money for income, they can use this amount to diversify their portfolio by investing in the market or pursue any other projects they like. As you can see, equity sharing addresses a need that is prevalent in the market, solves a real challenge for certain demographics, and provides an alternative to traditional debt-based financing. 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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