You have long wanted to remodel both your kitchen and the master bath, but it seems the required funds have always gone to some other needy project.
A neighbor raised the idea of a shared equity agreement. Could this kind of agreement provide the remodeling money you need?
What it is
In exchange for a lump sum you can use for remodeling purposes, you grant the person who provides these funds an investment in the future equity of your home. This is called a shared equity agreement. It is actually a binding contract through which you agree to a repayment date either after a certain number of years have passed or at the time you sell your home.
How it works
The amount of the repayment will depend on the increase or decrease of the home’s value. For example, the investor may give you $50,000 in remodeling money in return for a stake of 30% in future home equity. The agreement is for 10 years and if, at that time, you realize $100,000 in appreciation, you will repay the investor the $50,000 plus 30% or $30,000, making the full payment $80,000.
When problems could arise
Keep in mind that a shared equity agreement is not without its issues. If you do not qualify for refinancing or for obtaining a reverse mortgage when the date of maturity for the agreement occurs, you might have no other choice but to sell your home. Legal guidance in the realm of real estate management will help you understand more about shared equity agreements and other options you might consider regarding the home remodeling funds you desire.