The Future of Real Estate Re-Financing is Here

A hotshot Silicon Valley investor friend pointed out a remarkable firm to me the other day. You have got to check this out.

Many of our readers face a similar scenario. The only way to tap into the grand asset of California real estate is to sell the home or take a loan against it. The home equity loan option is always frustrating: it's my house, my equity! Why do I have to pay interest?! Why isn't there some kind of non-debt financing like there is in every other part of the business world?

Well now there is a new option available. And it looks fascinating.

Rex & Co. (Real estate Equity eXchange) will actually invest in you and your home. They hand you cash in exchange for up to 15% of your equity. This arrangement is not a loan, it's more akin to an investment in your company. They participate in the upside when property values go up and share in the loss should they go down.

Let me repeat: this is not a loan or a reverse mortgage. There is no interest, no debt, no monthly payments. It's an equity investment. When you sell, Rex is entitled to a share of the gain or loss.

REX & Co. is an innovative home finance company that has developed a way for homeowners to receive cash with no interest charges or monthly payments. Our patent-pending product is revolutionizing home finance. Now that homeowners can get cash without the burden of monthly payments, they can improve the quality of their lives in ways they may never have thought possible. For example, they can eliminate debt, buy a home with less, pay college expenses, extend and improve retirement, buy life or long-term care insurance, make charitable donations etc.


For most homeowners today the equity in their home is their largest single asset. That's great, but if they want to use it, they either have to sell their home or take out a loan. Those are not great choices if they need a place to live or don't want the burden of monthly payments and additional debt.

The Rex web site identifies a number of uses for their product. Mortgage elimination. More home for less payments. But in my opinion, the real beauty here is the hedge.

This is the first pure-play hedge that I've seen in the real estate world. You can, in essence, lock in your gains today. Rex let's you take real cash off the table. Like any hedge, you give up some speculative potential future upside in order to lock in gains today.

The hedge is particularly important in the housing bubble era we're in. Lots of folks are worried that their home value is going to fall significantly. But, they say, We're not going to sell the house and move to an apartment somewhere. So we'll just have to ride this wave back down.

The hedge will be a success in several scenarios:

• Property prices fall.
• Property prices increase a little bit, but you use the money to pay off expensive mortgage debt.
  
• You have some other investment opportunity available now, that will appreciate at a greater rate than real estate.

Again, like any hedge, the deal looks not so great in the longer term if property prices go through the roof. You've swapped that risk to Rex in exchange for cash today.

Also, fees and other terms play an important role in how profitable the deal ultimately is. Assuming the terms are not onerous, I think Rex is onto something big.

I'd like to hear from my mortgage blogger favs Xbroker and Dan Green to hear their thoughts. Guys? What's your take?