A white paper published on Tuesday said sale-leaseback programs can save nearly 9M homeowners from permanently losing their homes amid current economic woes.

The paper, which is a joint effort between EasyKnock, Next Belt Strategies and Duke University’s Fintech program, said volatile rate fluctuations have prevented more than 9 million homeowners from effectively accessing the equity in their homes.

Roughly half of this cohort have mortgage rates above 6 percent and lacked the credit to refinance when rates dropped in mid-2020. The other half is mortgage-free; however, they also lack the credit and income to qualify for home equity loans, leaving them to weigh the risk of selling and then buying or renting in a higher-cost market.

The American homeowner should have a similar toolkit available to other asset owners: debt, equity products, bridge products, transitional solutions and arbitrage products.

The sale-leaseback model is the primary solution for “boxed-in homeowners” outside of selling to an individual seller or institutional investor, entering into a home equity investment agreement, or turning to a private lender.

The residential sale-leaseback is a non-lending product intended to address temporary life events. Though the sale-leaseback is not a new product, the sale-leaseback with an option to buy back the home at the original sale price is a market innovation.

The sale-leaseback model enables homeowners to sell their home to a company and receive a portion of their equity in cash. From there, the homeowner will usually sign a 12-month lease, with the option to extend the lease, repurchase the home, or sell it on the open market. Each company has specific terms a homeowner must follow.

Home equity loans and sale-leasebacks achieve the same outcome as allowing homeowners to access equity; however, sale-leaseback products come with fewer hurdles and fees and no interest rates.

Regarding the loss of homeownership status, the paper said the majority of homeowners who turn to sale-leaseback models are heading toward foreclosure or considering selling their home. Sale-leasebacks, they said, allow them to financially recover while having a clear path back to owning their home.

The sale-leaseback provides an opportunity to preserve the ability to own the same home again and therefore ultimately stay in the home. The Boxed-in homeowner does not have to decide between sell today or foreclosure tomorrow. They can lease today and determine when or if to sell in the future.

All financial products — including mortgages and home equity loans — come with some level of confusion for the average homeowner. However, that confusion can be mitigated by slowing the transaction process and giving homeowners time to shop around and understand the full range of their options.

Call us at (480)205 2234 to get more information on current mortgage rates.