Thursday, Jun 19, 2008
If the house goes down in value, Rex & Co. will eat half of that loss as well
cnbc: Homeowners Offered New Way to Tap House's Equity
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.
If the house goes down in value, Rex & Co. will eat half of that loss as well.
Posted by malct @ 08:52 AM (412 views) Add Comment
2 Comments
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1. tyrellcorporation said...
If it looks to good to be true, it probably is.
2. techieman said...
Barclays used to sell SAMs (shared appreciation mortgage) where you payed no interest but based the repayment of the capital sum on the increse in value of the home. This was based on the inverse of the share. So for example if the house was valued at £200k you could borrow up to 25%(50k) but you would have to pay back the loan plus 75% of the profit on the 200k. Of course we all know what happened so when people came to see they found they couldnt pay back the money if they needed to move etc.
My view on this was you pay your money and take your choice - if the price had stabilised or fell then there would have had an interest free loan. I am not sure what would have happened had the prices fell - would Barclays have reduced the capital to be repaid? In any case thats academic. They didnt!
Now however Barclays dont offer this. The reason they gave is the product causes problems as detailed but the cynic in me things perhaps someone thought the market might turn (although i may be giving them too much credit given their recent performance).