How to evaluate major fintech stock products
You can evaluate fintech homeownership offerings by comparing interest rates, terms, and any additional perks.
If you’re in the market for a home equity product, such as a home equity loan or a home equity line of credit (HELOC), you can turn to your bank or credit union. However, a growing number of financial technology companies are also offering these products.
A fintech, or financial technology company, operates primarily over the internet and uses advanced technology that enables a digital lending process. As a result, fintech companies often offer a faster approval process and better loan terms.
Learn more about how home equity products work and how to evaluate fintech equity offerings.
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- A fintech, or financial technology company, operates primarily online and uses advanced underwriting technology.
- Fintechs are increasingly offering home ownership products such as loans, lines of credit, or co-appreciation arrangements.
- Home equity products use the ownership of your home as collateral for a loan or revolving line of credit.
- Joint appreciation arrangements allow homeowners to secure a lower rate for a portion of any increase in the home’s value to the lender.
Home equity loans often provide an affordable way to get cash for major expenses like home repairs or college tuition. Their rates of interest are usually much lower than those of personal loans and other loan products. Many people also use home equity loans, or HELOCs, to pay down higher interest debts such as high credit card balances.
Home equity homeowners can also use a home equity product to help fund their living expenses in retirement. This practice is called a reverse mortgage, whereby owners start the reverse process of receiving payments periodically for the value their homes have built up over time that they may not need for a long time since they are old.
Types of real estate equity products
When you are evaluating products from fintech, you will want to understand the differences in how they operate.
With a home equity loan, the lender offers a lump sum that you can use for any purpose. The loan amount you can be approved for depends on how much equity you have in your home, as many lenders cap loans at a combined 80% loan-to-value (CLTV), which means you can usually only use a portion of your equity. You pay off the home equity loan in regular installments at a fixed rate of interest.
Home equity lines of credit (HELOCs) work like a credit card. Homeowners receive a line of credit that they can access as they need, and interest rates are usually variable.
With both loans and lines of credit, the lender is paid in full if the homeowner sells their property.
How to compare real estate equity products
When you’re evaluating fintech home equity products, you’ll want to take into account their terms and interest rates as well as how they compare to similar products from traditional lenders. For example, fintechs may offer a fixed rate of interest on HELOCs, while traditional lenders usually offer variable rates. A fintech company may charge lower upfront fees because their process is digital and not expensive, while traditional lenders may charge higher upfront fees since their process is more labor intensive.
property rights requirements
Some financial technology companies may accept more of your home equity as collateral than others. Not many companies will accept 100% CLTV, but you will likely depreciate more of your home’s value with some products than with others. More commonly, you will be approved for a loan-to-value (LTV) ratio of 80% less.
You may also encounter minimum equity requirements, such as needing a minimum of 20% equity in your home. Each fintech company will set its own minimum equity requirements.
interest rates
Interest rates on home equity products vary from lender to lender. The lower your interest rate, the more you save in total loan costs. So, compare interest rate offers among several fintech companies to determine which one is the most affordable. This means getting the lowest fixed rate over similar lending periods. Some fintechs may have a more efficient underwriting process, manage different risks with access to data, or a lower cost of capital that they can pass on to you in the form of lower interest rates. There may be other factors to consider along with interest rates as well.
Some home equity products have fixed interest rates, which are more predictable. Others have variable interest rates, which are likely to be lower but can go up over time. Consider the current interest rate environment and your personal financial situation when evaluating what type of interest rates might work best for you.
loan length
Repayment terms for home equity loans and HELOCs will also vary.
With home equity loans, their lengths can range from five to 30 years. You will make regular payments to the lender during that time.
With HELOC, the fintech will extend a line of credit to you for a specific period of time called the withdrawal period. Then your repayment period will begin, and you’ll start making regular payments, usually at variable interest rates.
Other terms
As technology companies, fintech companies often offer innovative products, including home equity loans. For example, lenders such as Synergy One Lending and Figure offer a HELOC service powered by blockchain technology to provide a more efficient application, underwriting, and financing process. With the use of blockchain and other technologies, fintechs can make the process of obtaining loans significantly more affordable.
Finally, be sure to evaluate the different fees associated with various fintech real estate equity products. A home equity loan, or HELOC, may have a competitive interest rate, but higher closing costs. Many home equity loans, or HELOCs, come with closing costs of 2% to 5%.
How does a home equity loan work?
What is a mortgage company?
A mortgage company is a lender that uses financial technology to process, approve, and finance mortgages. Technology-based lenders process loans much faster than traditional lenders.
What is a blockchain hilock?
The Home Equity Line of Credit (HELOC blockchain) uses your home as collateral and uses the blockchain to store and transfer records in the application process. Using blockchain to verify data can make the approval and underwriting process much faster.
How much shares can I cash out?
Lenders place limits on the amount you can borrow with a home equity loan, or HELOC. In general, your combined loan-to-value (CLTV) ratio should be 80% or less, which means that total loans using your home as collateral should be no more than 80% of your home’s value.
What is the difference between a Home Equity Loan and a Common Appreciation Mortgage?
A mortgage is debt financing. The borrower gets a sum of money and has to pay it back plus interest. The lender may have lien, or lay claim to the property, but receive only the principal plus interest as in any other loan. In a joint appreciation arrangement, the lender receives a portion of the home’s increased value at some point in the future.
bottom line
Fintech lenders can offer competitive home equity products such as loans and lines of credit that may suit your financial needs. Review all of your home equity loan options, and compare the pros and cons and different terms. Consider consulting a professional financial advisor for guidance on the best real estate equity product for your particular situation.
