What are Rex Agreements and why do they make sense?
A lot of people find that they are in need of money, and often they decide that taking the equity out of their house is the best way to get it. Usually when they do this they do it by refinancing, there is however an option that may actually be better. This option is a Rex agreement which offers the significant advantage of not having to be paid back.
A Rex agreement is simply an arrangement by which you turn equity that you have in your house into cash by allowing somebody else to invest in your home. This is different from the other ways that you can turn equity into cash since you are not borrowing against the equity. That means that you do not have to pay back the money that you have received. Instead the investors get their money back when you sell your house. This can be a great way to get extra cash when you need it.
When you allow somebody to invest in your house through a Rex agreement you are basically allowing them to invest so that they receive a profit when you sell. Normally they will make an investment that is equal to twenty to fifty percent of the value of your home. The amount that you receive is up to you, the bigger percentage that you give them the more money you will receive. When you sell your house the investors will receive the same percentage of the sale price as they invested. For example if they took a twenty percent stake in your house they would receive twenty percent of the sale price.
The major advantage of Rex agreements, besides the fact that you don’t have to pay back the money, is that the investor is taking the risk. They will make money if the value of your home increases but they will also lose money if the value of your home goes down. This can be a good way to get cash out of your home if you are worried that housing prices will go down in the future. You can in effect sell a portion of your home at current home prices and continue to live in the home until you are ready to sell it. If the value of your home goes down you will be in a much better position.
Rex agreements can be somewhat complicated so it is a good idea to talk to a financial advisor about the advantages and disadvantages of using them. There are a lot of sources of information about rex agreements so you will want to read through them so that you will fully understand exactly what is involved. This will allow you to make an informed choice about whether or not they are a good idea in your situation.