{"id":11049,"date":"2018-08-17T14:35:31","date_gmt":"2018-08-17T04:35:31","guid":{"rendered":"https:\/\/reuncut.com.au\/?p=11049"},"modified":"2022-04-12T10:23:39","modified_gmt":"2022-04-12T00:23:39","slug":"changing-home-ownership-and-the-shared-equity-economy","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtyuncut\/changing-home-ownership-and-the-shared-equity-economy\/","title":{"rendered":"Changing home ownership and the shared equity economy"},"content":{"rendered":"

By Kylie Davis \u2014 CoreLogic<\/a><\/p>\n

Rising house prices, student debts and changed expectations from the Millennial generation are changing expectations and the traditional model of home ownership.<\/p>\n

The INMAN Connect 2018 conference brought together four new startups in the home ownership space that are rewriting traditional models and creating what\u2019s now being known as the shared equity economy.<\/p>\n

\u201cShare equity is as term of new companies and models that are challenging what has always been considered a truth \u2013 that you either own or you rent,\u201d said Fabrizio Tiso from Irene Retirement.<\/p>\n

Traditional models are based on the idea that a couple \u2013 usually married or in a relationship – purchase a property under a shared title, putting up a deposit of 20% and paying down the mortgage with a financial institution until the property is owned outright.<\/p>\n

But new shared equity models introduce many variations, allowing for smaller \u2013 or no \u2013 deposits, co-ownership amongst friends, and even options where the goal is to own or trade a proportion of the property with a third party, such as builder or specialised investment institution.<\/p>\n

\u201cThe 30 year mortgage as an instrument of home ownership was developed out of the Great Depression,\u201d said Sahil Gupta from Patch Homes. \u201cIn most industries, people have the choice of using debt or equity based on the cost of capital. But in housing, this has not been an option until now.\u201d<\/p>\n

Here\u2019s a summary of some of the new models now available:<\/p>\n

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  1. Pre-sell your home to fund retirement<\/strong><\/li>\n<\/ol>\n

    Irene Retirement<\/a> is a new take on the old reverse mortgage concept but based on equity. It  allows elderly homeowners to sell their home, yet continue to live in it or receive income from rent. Retirees sell their home to Irene, get cash upfront and never pay property taxes, homeowners insurance, or big-ticket maintenance costs again.<\/p>\n

      \n
    1. Just own a bit<\/strong><\/li>\n<\/ol>\n

      Let\u2019s say a house costs $100,000. (Hah!!) You have a great job and can pay a mortgage (let\u2019s face it, it\u2019s cheaper than rent), but you\u2019re struggling to pull together the deposit. Unison HomeOwnership<\/a> solves this problem by providing you with half the down payment ($10,000 in our example), but this money is not a loan, it is an investment with the outcome being that Unison own one tenth of the property. When the time comes to sell and you achieve a price of $120,000, you pocket $108,000 and Unison receive $12,000 for their share. Equally, if the price goes down, Unison wear their share of the loss.<\/p>\n

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      1. Converting equity to cash<\/strong><\/li>\n<\/ol>\n

        In a similar vein to Unison, Patch Homes<\/a> are a finance company that shares a proportion of the property\u2019s ownership and shares in the future appreciation or depreciation of your home\u2019s value. Imagine you own a home (or are paying it off) and want to renovate the kitchen. Rather than increasing your loan amount \u2013 and monthly repayments \u2013 Patch gives you the option of \u2018selling off\u2019 a proportion of your homes equity with Patch recouping their money when you decide to sell.<\/p>\n

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        1. Rent til you buy<\/strong><\/li>\n<\/ol>\n

          You\u2019re a well paid Millennial with a student loan who can afford to rent but can\u2019t scrape together a deposit for a home. With Divvy<\/a>, you find the home you want to buy, lease it from Divvy and every monthly rental payment builds up your home equity. Divvy claim that if you rent for three years through them, you get a 10% deposit.<\/p>\n