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shared ownership to pay off HELOC

Home Mortgages and Home Buying shared ownership to pay off HELOC

  • Avatar littlefish 
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    Status: Physician
    Posts: 34
    Joined: 06/24/2017
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    If one uses a HELOC (or home equity loan) to make substantial renovations to one’s home, but find themselves cash poor at the end of it – what are your thoughts on using the cash provided by a shared ownership company like Point or Patch to pay off the HELOC principal (or pay down the home equity loan aggressively) to minimize interest payments?

    I believe the average value one would get from a major remodel is somewhere between 50%-70% of the money spent. Obviously there is the enjoyment factor for living in the home during those post remodel years, but I’m not sure if it would be more financially advisable to use the traditional HELOC/home equity loan pathway, or to remodel the home via these options, and then pay down that debt with shared ownership, knowing that the home likely won’t appreciate as much as the amount you invested in the remodel.

    #200232 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016

    I had never heard of these shared equity companies but I do now. Don’t like the concept of an outside business sharing ownership in the appreciation of my home. I think I’m old-fashioned about this, but it seems a little strange, kind of like offering to prepare a tax return for a cut of the refund. Would definitely do a reno within my ability to cash finance or borrow from a plain old boring bank. jmpo.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #200391 Reply
    Liked by Zaphod, Tim
    Avatar littlefish 
    Participant
    Status: Physician
    Posts: 34
    Joined: 06/24/2017

    True – but in a high cost of living area, it seems like an interesting business model.

    Obviously the longer one stays in the home, the larger the appreciation equity the company would take.

    However, if the mortgage and/or home equity loan would prevent you from maxing out one’s retirement accounts, then it would seem that as long as your retirement accounts’ annual returns are a higher % than the property value’s annual appreciation it would seem like a reasonable deal. Am I wrong in viewing it this way?

    #200439 Reply
    Hank Hank 
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    Status: Attorney
    Posts: 1398
    Joined: 03/27/2017
    However, if the mortgage and/or home equity loan would prevent you from maxing out one’s retirement accounts, then it would seem that as long as your retirement accounts’ annual returns are a higher % than the property value’s annual appreciation it would seem like a reasonable deal.

    Click to expand…

    Pay yourself first.  If a physician can’t max out retirement accounts, then he or she has a spending problem.  You should be paying off student loans then socking a good amount into taxable each year, not giving away home equity in a struggle to max out retirement accounts.  This sounds like too much house, along with a possible case for moving to a lower cost of living location with as high or higher income.

    #201158 Reply
    Liked by Zaphod, Tim
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016
    However, if the mortgage and/or home equity loan would prevent you from maxing out one’s retirement accounts, then it would seem that as long as your retirement accounts’ annual returns are a higher % than the property value’s annual appreciation it would seem like a reasonable deal. Am I wrong in viewing it this way?

    Click to expand…

    There are so many assumptions/absolute unknowns here that I am uncomfortable even commenting. The only way you will know if you have guessed right is in hindsight, which is a bit too long for my tastes. Of course, if you tend to put together crappy portfolios and happen to pick a (very illiquid and concentrated) property that just happens to have outstanding growth and you manage it properly and so forth, you will have made a genius decision.

    And I concur with @hank wholeheartedly.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #201178 Reply
    Liked by Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6177
    Joined: 01/12/2016

    Just remember no company like this is stepping to help without thinking they are getting the upper hand. That is entirely different than a mortgage where they simply have access to rates you dont and can sell, etc…

    #201179 Reply

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