Buying a home is the biggest financial decision most Americans will ever make. Until now, home ownership has been a single investor (you) and single owner (you) proposition, with you relying almost exclusively on borrowing significant funds and incurring considerable monthly payments in order to make owning a home possible. We believe there is another way, a more prudent way, to achieve and enjoy home ownership.
We, at PRIMARQ, support the approach that borrowing alone (and at excessive levels) is misguided. Our market enables you to access additional funds from investors, which participate passively in the ownership of your home. This results in lower levels of mortgage debt and the resulting lower monthly payments, making home ownership more affordable.
So how does it work? PRIMARQ diligently screens potential home buyers to ensure they are good candidates for the co-ownership model, evaluating factors such as credit scores and employment history. You as a buyer identify a property you seek to purchase and begin to arrange the appropriate financing, such as your mortgage loan. Concurrently, you approach PRIMARQ to assist in supplementing your down payment so that your mortgage loan is not excessive. PRIMARQ then “packages” you as the buyer resident and the targeted residence as an investment opportunity to be presented to a community of accredited investors. Through auction-based pricing, investors bid to supply additional capital to meet the down payment requirement in return for a share of the home ownership and the participation in the potential appreciation. PRIMARQ uses standardized transaction structures and documentation to help the co-owners maximize their investment and their investment relationship.
Advantages to you as a buyer include:- Coming up with a 20-30% down-payment, especially in many markets, can be incredibly difficult in today’s economic environment - but you’ll face higher loan rates if you don’t put down at least that amount.
- The additional capital will allow you to negotiate better loan terms, escaping jumbo loans, lowering the amount you have to borrow, avoiding costly private mortgage insurance (PMI), and hopefully allowing you to retain some of your cash.
The investor is a passive co-owner, and through our portfolio management reporting, will be kept abreast of how their property investment is doing. This translates into very limited interaction, if at all, with the investor. The investor’s interest is always to increase the value of your property for mutual benefit, so they will have a say in any decisions that could change the home’s value. For capital improvements, like adding an extra room or a swimming pool, your investor will of course have a say, but the investor may also provide, at their discretion, additional capital to help offset the cost of the improvement. Key to improvements is how they are financed, e.g., through a home equity loan, which would change the relationship between the mortgage debt and equity, which may disadvantage the investor.
As a home owner, you are free to sell your home whenever you’d like. Once sold, you and your investor are returned your respective capital contributions and split the remaining equity value according to your original agreement. You are also free to “buy out” your investor at any point so that the home becomes solely your own. In addition, if your financial situation changes - let’s say you lose your job - the investor has the option of stepping in to aid with your mortgage payments in exchange for an increased share of the home’s equity, decreasing your risk of facing foreclosure.
As to be anticipated, the investor may want to exit his investment before you decide to sell or have the ability to “buy the investor out”. Uniquely, the investor can return to our market and sell his investment to another PRIMARQ investor.
Equity sharing is not a new model - it has been popular for decades in Asia and Europe. With the challenges in the mortgage market and housing finance in general, it is clear that new alternative sources of capital are needed.