For many American families, a large amount of their wealth is tied up in their house. Recent surveys have shown that nearly 37% of families own their primary residences free and clear. Additionally, the number of families who’ve improved their debt-to-equity ratios on their homes have increased substantially since the Great Recession. This means homeowners have built up more equity in their homes today than at anytime in the last 30 years.
A home’s equity can provide quick cash to pay for major expenses like unexpected medical emergencies or a flooded basement. When most people think about using their home’s equity, they think about using a home equity loan or home equity line of credit.
A home equity loan is based on your home’s value and provides the home as collateral security for the loan’s payback. A home equity line of credit is similar (also referred to as a “HELOC”), except that instead of a loan for a set amount, your available credit is replenished as you pay loan amounts back (similar to a credit card).
However, the home equity loan and the HELOC are not the only ways homeowners can access their home’s equity. Another option that is continuing to gain popularity is the home sale leaseback. According to Lend Edu, in a home sale leaseback (also known as a “residential leaseback agreement”), the homeowner sells their house allowing them to pull all of the cash equity from the home, and then the homeowner simultaneously signs a lease to continue living in the home as a renter.
Christy Rakoczy of Lend Edu said of home sale leasebacks, “[homeowners] can access a large amount of cash without uprooting your family, and you’re usually no longer responsible for property taxes or other ownership costs associated with owning a home.”
This option may be especially attractive to people who’re looking to sell their home, but aren’t sure they want to move out of the area.
Currently, there are three leading Home Sale Leaseback companies:
Home sale leasebacks provide homeowners several specific advantages when compared to other home equity options:
- Quickly frees up 100% of the equity you’ve built in your home
- Cushions against real estate market downturns, which can be particularly important if you think the value of real estate will fall in your area
- Removes all of the costs (and headaches) of home ownership like maintenance, insurance and property taxes
- Fast closing, without having to worry about finding a buyer, preparing and selling your house, and waiting the sometimes long periods required before a home sale can be fully closed.
For more information about home sale leasebacks, we encourage you to check out Lend Edu. Lend Edu has created a niche in the home sale leaseback space and has a comprehensive overview of home sale leasebacks here.