New variant. joint-stock company sees both competitive and partnership potential with reverse mortgages
The concept of unlocking home equity, especially after such a long and sustained period of home price appreciation (HPA), has naturally brought a series of products into the fold that aim to tap into home equity. reinforced that many have accumulated in their homes. These types of products can take many forms, including sale-leasebacks – where a company buys a house and leases it to the seller – or equity investments.
These products invest in a portion of the customer’s home equity, which is then paid back to the provider after an agreed term. Splitero is a company that has become active in the field of shared equity investment, positioning itself as a reverse mortgage alternative in the materials distributed to RMD.
To learn more about Splitero and its outlook on the current economic and HPA landscape as well as where it stands in relation to the reverse mortgage industry, RMD spoke with its CEO, Michael Gifford.
Competition with reverse mortgages
Asked about the recent proliferation of shared equity investment products and how this affects Splitero’s competitive position, Gifford posited that recent HPA increases nationwide have given room for many players and different products to claim their own rights in the home equity operating space.
“I think there’s still a lot of equity and a lot of owners who need help accessing that equity,” he told RMD. “I think that while all home equity investment products may seem similar, they all have their unique nuances and differences. I don’t know if the two are created equal, and what owners will find when working with Splitero is that we are really fast.
Gifford explains that owners can receive funds from the transaction in as little as 10 days and offers a lower cap “than most” competitors.
“So when they’re pricing things out, there are several different parts of the pricing structure and how it works,” he says. “And so I think in many situations we’re able to get more funds for owners at a lower price over the life of their ownership and we look at that as a 30-year relationship.”
When asked if he considers Splitero a competitor to reverse mortgages, Gifford explained that the company is broadly competitive with any instrument for leveraging home equity.
“While there is some competition for those 62+, they would also complete a traditional HELOC or refi. I think we all have our place in this boat. Outside of this market, we compete with all other financial products. For us, it’s not so much about competing as making sure the owner gets the product that suits them best. We really encourage people to explore all of their options.
In some of the publicity materials sent out by Splitero, the company’s product was described as “a new reverse mortgage,” but Gifford was also hesitant to compare Splitero’s offering with a debt-based instrument. However, in terms of starting a conversation about leveraging equity, he said the comparison is appropriate before presenting the specifics of a shared equity investment to a potential client.
“I agree that all debt-based products are a conversation starter,” he said. “I think it’s a better alternative for a lot of owners, especially in the environment we’re in right now with HPA uncertainty and rising interest rates. We’re a different vehicle than an owner with equity can use, and they should explore each of them to find what is best for their situation.”
Senior demographics and potential reverse mortgage partnerships
While Splitero is not limited to serving just any demographic since there are no age restrictions on shared equity investments, Gifford still sees the senior demographic as a potentially significant growth area for Splitero in the future. he said.
“Obviously, [seniors] have a lot of home equity, and they may have fewer options than most, to be honest,” he says. “We have no income requirement or age restriction and there is no monthly payment, so I would say that fits the mold for a lot of the older population. There are also no real restrictions on the use of the funds. So whether they want to buy another property, pay for their education, or just for living expenses or debt, they can do whatever they want with the funds we are able to provide.
Several other alternative capitalization providers have already indicated to RMD that the potential for partnering with the reverse mortgage industry – for example when it comes to referring a client to another product if they are not eligible – is an area of interest. Asked about this possibility for Splitero, Gifford also expresses a desire to explore these possibilities.
“I think owners are exploring all options, and the business-to-business channel you describe is definitely something we’re interested in,” he says. “Currently, this business is aimed primarily at consumers. But, we realize that whether it’s a mortgage or the ADU industry – since people often struggle to fund them – or anything else as you describe it, then you have an owner who cannot qualify for a product. Well, this owner still needs help. And so we would like to have these conversations. This is certainly not the goal yet, but it will be very soon.