Come To Find Out

Innovative Equity Sharing Loans: Expert Insights with Nathan Lindley from Gold Star Mortgage

• Sarah Thress • Season 2 • Episode 39

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Unlock the potential of your home equity with our eye-opening conversation featuring Nathan Lindley from Gold Star Mortgage. Nathan shares his expert insights on innovative Equity Sharing Loans, a groundbreaking option for homeowners seeking alternatives to traditional refinancing. This financial tool allows homeowners to partner with investors by sharing a portion of future home equity, offering a flexible solution that doesn't involve monthly payments. While this option opens new doors, Nathan wisely advises caution, likening these loans to a sharp tool that must be handled with care to avoid unintended consequences. Whether you're a young homeowner or facing urgent financial pressures, understanding the intricacies of this option is crucial.

As we navigate the complexities of managing rising mortgage payments, Nathan and I underscore the importance of contacting lenders early to explore available options, such as refinancing or HELOCs. We introduce a promising new financial product that could serve as a lifeline for those struggling to keep their homes, especially when a high credit score is out of reach. While its current form poses challenges, it offers a temporary reprieve for those looking to stay put for a while longer. Join us as we discuss the potential and pitfalls of these evolving financial products, and why staying informed is your best asset in this dynamic landscape. Don’t miss the chance to learn from Nathan’s insights and ensure you’re equipped with the knowledge to make sound financial decisions.

To contact Nathan Lindley:
email: lindleyloanteam@goldstarfinancial.com
phone:  727.452.9868
https://www.instagram.com/thelindleyloanteam/
https://www.facebook.com/TheLindleyLoanTeam


Sarah Thress
614-893-5885

First Time Home Buyer course: https://sarahthress.graphy.com/
Instagram https://www.instagram.com/sarah_thress_realtor/
Facebook https://www.facebook.com/SarahThressRealtor/
https://www.youtube.com/@LIFEINCOLUMBUS

Sarah:

Hi, welcome to this week's episode of Come to Find Out. This week we have Nathan Lindley of Gold Star Mortgage and if you are a regular listener, you will know that he has been on here a few times and hopefully you've listened to those episodes, because he shares so much knowledge. It's insane to me. Every time that we get off the call, I'm just like, oh my gosh, like I learned something new. So, nathan, again thank you so much for taking time out of your day to join us.

Nathan:

My pleasure. Again, thank you for having us. We truly appreciate the opportunity and to help you and your clients and anybody who's listening that you know with whatever the topics are, we're thrilled to be a part of it.

Sarah:

Yeah, well, thank you, I appreciate that. So Nathan and I recently were talking and he had mentioned a brand new product that just kind of came out it's called Equity Sharing Loans and I was like what in the world is that? And would you mind coming on and explaining it to me and everyone that is listening what that is, because this may be something that is a really good option for someone listening? Great.

Nathan:

So equity sharing loans, this is a brand new product and you know, a lot of times with brand new products, you know, what's happening is that the non-qualified mortgage market is trying to fill a niche. They're trying to fill a need that's out there that's not being met by definitely not by, you know, conventional mortgages Fannie, freddie, fha, va and possibly not even being met by the non-qualified mortgage community, you know. So these equity sharing loans definitely fit right into that category and these I've used the analogy before that you know mortgages, different types of mortgages. They're a financial tool and you know, when you go into a woodworking shop, different tools are of different sharpnesses and the very, very sharp tools are very dangerous. Doesn't mean that they inherently are wrong, it just means that they have the potential for danger versus. You know, you walk in and there's a rubber mallet OK, that's probably a pretty benign tool, you know, and it's less likely to be able to hurt yourself with it. So that's kind of the scope that I want to bring this into understanding. So equity sharing loans are a type of refinance. You don't use them for purchases. They are a type of refinance and typically they are used as a cash out refinance. So if you're in a situation where you need to draw equity from your house and you're not able to get a loan for whatever reason. It could be credit score, it could be debt to income ratio, it could be any number of things this is an alternative that is out there, and what this type of loan does is these investors want a reward. You know they want more compensation for they're giving you a loan when others wouldn't. So the way that they do that, rather than just jacking up the interest rate, they you sign an agreement that gives equity to the lender in the future. So you establish what the base value is of the property right now and you say if I sell this in the future, you're going to get X percentage of the new equity in the house from now to them. There's several different lenders, there's several different options here, but the other thing that's about this loan is that there's no payment. Hmm, so that's kind of the interesting thing on this.

Nathan:

Now, if you think about this, this kind of sounds like another type of mortgage, yeah, or the reverse mortgage, reverse mortgages you get a loan, it accrues interest over time and you pay the lender back. Interest Doesn't matter what the appreciation is, just the interest. But you have to be over 62 and a half. You have to be a senior citizen to qualify for a reverse mortgage. If you're 40, you can't qualify for a reverse mortgage. This is that type of loan in the sense that it's a negative amortization but instead of counting interest going forward, they're going to take a slice of your equity. It's probably not going to be a small slice. You got to keep that in mind. You know this is a sharp tool. This is a brand new tool.

Nathan:

Usually, when new loans come out, they're not consumer friendly to begin with, like they want to get some test cases out there. They want to see what type of return they're getting. You know and we're definitely in that phase right now of you know this product is new. They're going out, they're getting some test cases with these. They're finding out, you know, how they're performing, how the investor is doing. You know on it, are they making money on these?

Nathan:

Some of them require you to sell fairly quickly, like within a year, two years or three years. You know, depending what your scenario is, that might be a scary scenario where you're being forced to sell it based on a short window. Others have much longer and there's a couple that don't have any time window. They'll say you know out to whenever. But it is a new product and it is something that can be done, but it's probably not your first line of like.

Nathan:

Ok, this is what I want to do. For the first thing, if you can do a cash out refinance, if you can do a home equity line of credit, you're probably going to get a much better rate of return. You're going to get much better options. You know it's not going to cost you nearly as much, but what if you don't qualify for those? You know this product would be good to use instead of a distressed sale, meaning if your option is I got to sell my house in the next 60 days because of whatever reason.

Nathan:

Maybe this is the stop gap that keeps you from having to sell your house in the next 60 days. This is at that level of loan right now. This is an emergency reaction. I've got to deal with this very quickly. I can't afford payments. I can't get a loan because I lost my job. Whatever crazy thing is going on in your life that you're in this situation Again. Talk to a professional loan officer, see if you've got other options. But this might be. You know, the option that keeps you from having to sell your house is a distressed emergency sale.

Sarah:

You know, in that type of situation, yeah Well, and I think that makes such great sense and I love that you actually answered a question before I even asked it, which is awesome. I think you do such a great job at that, because it's like you're reading my mind, but I love that you pointed out that you know, obviously, look at, like the traditional ways of you know borrowing from your home, like you know cash out, refinance or he, you know he lock, or you know home equity line of credit. You know whatever you want to say. You know you've got all these other options, but there are a lot of people that unfortunately have found themselves in this situation and again, it's not because we have some crazy you know market stuff like we had back in 06, 08, you know whatever like it's not nothing like that, but unfortunately, with the rate as as homes like the what am I trying to say? So the homes that are appreciating so quickly now because of everything that happened during, like COVID and all of that stuff, it then made all of our property taxes go up and then, with all of the things you know around the country and inflation insurance went up, things like that.

Sarah:

So a lot of times, what I'm finding personally and I'd love to hear what you're kind of seeing with this. But what I'm finding is that people, now that you know it's increased, you know, by a few hundred dollars a month, you know, and sometimes more than that people are like crap, I can't afford my house anymore. And so then, you know, then they go into like freak out mode and you know, if they I've you know, I've done a previous episode where I said, hey, if you find yourself in that situation, call your lender before you ever miss a payment, Always call them first and just find out what are your options. And maybe you don't have the option of doing a HELOC. Know, talking with you about this new thing would be helpful for them. But you know, unfortunately I think we are going to see more of that. As you know, inflation thank God, you know it's starting to come down a little bit, but you know, with the property taxes and all that stuff, it's already affecting people. So, you know, I love that you pointed that out.

Sarah:

So, basically, are you saying that if someone you know let's just say they, you know didn't call their lender because they thought, oh, it's just this month, I'm going to make up for it, I'm going to work some overtime. I'm, you know we always have our best of intentions, and so you know I'll catch back up next month. And then you know. So now they've already missed a payment. So now, like you know, refinancing may not be an option. You know HELOC may not be an option. Would this still be an option for them if they've already made that, instead of doing a short sale, which ultimately just means that you're selling it for the least amount of money? You're making zero dollars off of it, by the way, money you're making $0 off of it, by the way, you know. So it's really a horrible thing, other than it keeps that off of your credit, because a short sale is going to fall off your credit much faster than a foreclosure or a bankruptcy. So, yeah, so I'd love for you to just kind of talk about that.

Nathan:

Yeah.

Nathan:

So you know, this product, the research that I've done, you know, and full disclosure, I have not done one of these yet. It is that new of a product and anybody who's come to me in these situations. I have found another solution for them without going to this. So you know. But I've done a lot of research on them and they do pull credit, you know. So if you're, if you destroy your credit and you get down into, you know, 560 or lower, you're going to, you're going to close this door too, you know. But this product does not require a high credit score. You know you don't have to be 727, 4800 to do this product either. So you know it's definitely something you want to address sooner than later in the in a financial free falling situation. I think that it is a good stop gap of you know, not, it's definitely better than a short sale. You know it's definitely better than a short sale. You know it's definitely better than a even, even if it's not a short sale, even if it's just a distressed sale. You know, if your house is worth 500, you owe 250, you know. But the only cash offer you can get to close in the next three days is, you know, open door at at 350. Yeah, you're leaving a lot on the table there. You know of what you should have been able to walk away with. You know, and we find people like that that are in that position of like, hey, my house is worth a whole lot of equity, but I can't you can't buy bread with equity. Yeah, you know. And if you've had some financial distress, then you know, even a payment, even for a smaller loan, can get hard, and especially if the taxes have gone on, especially if the insurance has gone up. You know considerably on that. So you know, we definitely see those situations and this is definitely one of those tools that can be used sooner than later.

Nathan:

You know the way that I talk about it. You might be like well, is this predatory lending? I'm not going to put it in that category. I think, as a brand new product, that it is probably less consumer friendly now than it's going to be in five years. You know, I think this product, if it becomes mainstream, if it performs well enough, if you'll see lenders opening up and offering more and more options and options, and you might see that this product turns into something that becomes more commonplace, and the more commonplace it becomes, the more it's got to be able to compete against the HELOC and the HELON options and things like that. But right now, today, it's not meant to be consumer-friendly in that sense it's meant to be consumer friendly in that sense it's meant to be, you know, an option close to last resort or close to no explanation, no documentation, no, you know, no questions asked type of situation. So I don't think that that's. I don't think that that's a fair way to look at it. You know, you have to look at it as it's a sharp tool. If you misuse it it's going to be damaging. But if you read the fine line, if you talk to a professional, if you look at your options, if you, you know, then you know, use the tool. I think it's probably best.

Nathan:

In a situation where you're stopgapping, meaning you know, okay, I'm going to have to sell this house, I can't, I cannot continue to live here Whether but I. But let's say, you know, my kid's a sophomore in high school and I just want to, I just want to make it through the next two years. Get them through high school, get them through this house. You know, I want to stay in this house through that timeframe, but then I'm going to sell it, you know, as soon as they're done with school. This might be a golden goose for you of okay here's. You can stay in the house no payment, sell it in three years you know.

Nathan:

Uh, you know, and you're going to give up, you know again, versus a distress sale today, that's probably a way better option for you, regardless of even if you give up all of your equity between now and then. Yeah, you know, that's not what the I mean, it's not going to be that. But even if you did, if you're in that situation, you'd probably be willing to do that. Right, you know. You know if you lost your job, but you've got to hold on to this house for the next two years and you don't know how it's going to get from point A to point B. You know this is this, might be that option. So that's the way that this has to be framed, you know, and that you have to look into this. But you do have to. You do have to start exploring this and triggering it before you're in financial ruin. You know, before you've missed all your payments, before you. You know you've got 90 day lights on your credit report. You know if you wait till that, this isn't going to help you at that point either.

Sarah:

Yeah, yeah. That's such a good point, cause that's what I always try and tell people. You know, at the first like sign of an issue, have that conversation. Even if you have the conversation with your lender and then everything works out and all the stars align and you don't even have to like use, you know you don't have to do the HELOC, you don't have to refinance, you don't have to. You know, like refinance if it makes sense, but if it doesn't, and it's not even gonna save you any money and it's not gonna do anything for you, then don't do it, you know. But at least you've got, you know, your insurance just doubled and you can't seem to find, you know someone to get you a lower interest. You know lower insurance payment, you know anything like that. You know, definitely reach out to your lender, have that conversation. If you're not liking what your lender is saying, it's okay, you can talk to another one. You can call me again. Nathan will walk you through all of your options.

Nathan:

I'll be honest with you, If nothing else you know, even if you don't like my answer, I will be honest with you.

Sarah:

Yes, yes, which is what you want in a really good lender with you. Yes, yes, which is what you want in a really good lender? Don't you know, like when you ask your your friend, if I, if I look good in this dress, you want them to lie. But whenever you're calling your lender and you're asking for all of your options, you do not want to lie.

Nathan:

Or a lender that doesn't know the other options. You know, you know. Omission of of of ignorance, other options you know, you know omission of of of ignorance.

Sarah:

It's not a lie, but it's. It's still not helpful. Yes, exactly, exactly. Well, thank you so much. I really appreciate you coming on, taking time out of your busy day and talking about this very new product. I think that you know I'll probably end up having you come back on later on, you know, after this has been around for a little while, so that you can kind of give on. You know, after this has been around for a little while, so that you can kind of give even more insight into it, after either you've used it or it's become more mainstream and you know you learn something new about it. Because, as we all know, when things come out there's all these glitches and then, once we work through the glitches, then it becomes, you know, either this amazing product or it goes away forever because the glitches can't be fixed. So I love it.

Nathan:

Absolutely, absolutely.

Sarah:

Yeah Well, thank you so much. I appreciate it and thank you to everyone listening. Please make sure that you leave a review, because feedback is a gift and I love those gifts. Please make sure that you are sharing this with others, because that is the greatest compliment that you can give Nathan and myself. Also, make sure that you're following along so that you never miss another episode. So, thanks so much, and we'll see you next time on Come to Find Out.