Homeowners Offered New Way to Tap House's Equity *now with poll*

[glenn1]

Take the average consumer living beyond their means, add some credit cards, fold in some payday lenders, and one of these new Rex loans, and now we're talking. Yeah baby, we're bringing serfdom back! I hope the next step is to bring back debtor's prison.

story link

 

[Vic]

That is a hell of a deal.

 

[Moonbeam]

Most of life's problems will work out with a 100 year plan.

 

[Xavier434]

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

 

[Vic]

Originally posted by: Xavier434

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

How so? It works the other way too, i.e. they take up half the depreciation if that occurs. Freakin' hell of a deal in this market. And note that it is not equity, but appreciation/depreciation from time of signing to eventual sale. This is way better than any reverse mortgage.
You guys are flipping out but, quite frankly, I see this as too good to be true.

 

[JS80]

Originally posted by: Vic

Originally posted by: Xavier434

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

How so? It works the other way too, i.e. they take up half the depreciation if that occurs. Freakin' hell of a deal in this market. And note that it is not equity, but appreciation/depreciation from time of signing to eventual sale. This is way better than any reverse mortgage.
You guys are flipping out but, quite frankly, I see this as too good to be true.

It doesn't say anything about time requirements? i.e. they're not allowed to sell until after X years?

 

[Xavier434]

Originally posted by: Vic

Originally posted by: Xavier434

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

How so? It works the other way too, i.e. they take up half the depreciation if that occurs. Freakin' hell of a deal in this market. And note that it is not equity, but appreciation/depreciation from time of signing to eventual sale. This is way better than any reverse mortgage.
You guys are flipping out but, quite frankly, I see this as too good to be true.

I guess if the value of the house is dropping fast and you plan to sell really soon anyways then it could be a good deal. However, the longer you wait to sell the more risky that becomes. I would never do this unless I was planning to sell in 2 years or less. Of course, trying to sell a house whose value is dropping quickly can be difficult.

 

[m1ldslide1]

Originally posted by: Vic

Originally posted by: Xavier434

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

How so? It works the other way too, i.e. they take up half the depreciation if that occurs. Freakin' hell of a deal in this market. And note that it is not equity, but appreciation/depreciation from time of signing to eventual sale. This is way better than any reverse mortgage.
You guys are flipping out but, quite frankly, I see this as too good to be true.

If it's too good to be true, are you going to sign up for one of these?

I'm having trouble wrapping my brain around this. Say I get $117,000 on one of these loans - what do I do with it? Do I invest it into my mortgage, thereby lowering my monthly payments and accruing less interest over the term? If that was the case, and my house appreciated $10k between now and when I sell it in say, 3 years, have I really made back that $5k that I have to pay them?

What would be other good uses for this cash? Seems like if you spend it on home improvements, you will be hurting your cause by appreciating the value of the home. What if you were to invest it in a mutual fund or a high-yield stock portfolio?

(Sorry to turn you into my personal finance adviser )

 

[mxyzptlk]

What if you don't ever plan on selling? Can I just take their money and hold onto it forever?

 

[bamacre]

Originally posted by: Moonbeam
Most of life's problems will work out with a 100 year plan.

 

[Vic]

Originally posted by: m1ldslide1

Originally posted by: Vic

Originally posted by: Xavier434

Instead, the Dollars signed up for a relatively new product called a Rex Agreement.

It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house.

At that time, they'll owe Rex & Co. the $117,000 plus half of the appreciation in their home's worth between the time they signed the agreement and the time they sell the house.

That's just scary.

How so? It works the other way too, i.e. they take up half the depreciation if that occurs. Freakin' hell of a deal in this market. And note that it is not equity, but appreciation/depreciation from time of signing to eventual sale. This is way better than any reverse mortgage.
You guys are flipping out but, quite frankly, I see this as too good to be true.

If it's too good to be true, are you going to sign up for one of these?

I'm having trouble wrapping my brain around this. Say I get $117,000 on one of these loans - what do I do with it? Do I invest it into my mortgage, thereby lowering my monthly payments and accruing less interest over the term? If that was the case, and my house appreciated $10k between now and when I sell it in say, 3 years, have I really made back that $5k that I have to pay them?

What would be other good uses for this cash? Seems like if you spend it on home improvements, you will be hurting your cause by appreciating the value of the home. What if you were to invest it in a mutual fund or a high-yield stock portfolio?

(Sorry to turn you into my personal finance adviser )

I can't say as the article doesn't provide enough details and I don't know enough about it. Typically, reverse mortgages like this have strict age and equity requirements. I have a feeling that (as JS80 implied) there are probably term requirements and penalties for early sale, etc.
Best loan purpose for one of these would be debt consolidation IMO.

 

[Thump553]

You have to be a certain age (basically social security level) as one of the requirements of a reverse equity mortgage. A real reverse mortgage is pretty highly regulated these days, stealing the house out from under grandma is not as likely as it was.

This "Rex mortgage" does sound something like a reverse mortgage, with the borrower assigning half the future appreciation to the lender.

At a glance, this looks like a really expensive loan. I'd rather go with a traditional home equity loan-if your current income is tapped out borrow out enough ectra to pay the monthly interest payments. Not the wisest financial plan, but definately the best of a bad situation for some people.

PS- I think they misspelled this type of loan-it should be a Wrecks mortgage.

 

[sactoking]

Too many unanswered questions here. For example, the lender 'eats half of the depreciation'? So, if I borrow $117,000 and the value of the house goes down $250,000 instead of up $250,000, do they cut me a check for $125,000? Do they waive the $117,000 repayment AND pay an additional $8,000?

 

[StageLeft]

Sounds fvcking atrocious. This couple has lived in their house for 24 years, so chances are they are not going to move, and once things settle at the 6.5% this lender makes off like a BANDIT.

 

[Moonbeam]

As long as there is money somewhere in the hands of ordinary people the cunning will be looking for ways to take it.

There are always huge numbers of people who feel so worthless they can't and don't give a rats ass about themselves or others. Of course they are big on ego.

 

[Vic]

Funny, it looks a lot like the reverse mortgage version of a USDA Rural Housing loan to me.

 

[PokerGuy]

I'm sure there are limited circumstances where this could be a good thing for consumers, but overall this is just going to be another tax on the math challenged and those inclined to make shortsighted decisions.

Just like with interest only loans and ARM's etc, the foolish are going to see dollar signs and take the bait.

 

[Moonbeam]

This would be a good loan for your two year old after you give him or her your house.