Wednesday, September 17, 2008

REX Agreements - A New Way to Tap Your Home's Equity

Just when you thought that the home lending business couldn't get any more complicated, there is a new way to tap into your home's built up equity. This new 'instrument' is called a Rex Agreement. Simply (ugh!), a Rex Agreement allows you to borrow up to 15% of your homes equity, to be paid back, interest free, when you sell your house, up to 50 years later. The 'cost' of this loan is up to 50% of the home's equity growth since the loan was taken out, however many years ago. If your home decreases in value, the loss is shared, 50/50, between the loaner and the loanee. The minimum loan duration is 3 years. Rex Agreements are legal in Massachusetts, but not in all states. Go Here to read more about these loans.

I see this loan as being, potentially, a very expensive way to borrow money. Also, since these loans will be bundled and marketed, they will (in my opinion) contribute to the uncertainty of the housing and lending industries.

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