The concept of home equity release, particularly after such a long and sustained period of home price appreciation (HPA), has naturally brought a series of products to the fold that aims to tap into the bolstered equity that many have built up in their homes. These types of products can take several forms, including sale-leasebacks — where a company buys a home and leases it back to the seller — or shared equity investments.
These products invest in a portion of the customer’s home equity, which is then repaid to the provider after an agreed-upon term. Splitero is a company that has become active in the shared equity investment space, positioning itself as a reverse mortgage alternative in materials distributed to RMD.
To learn more about Splitero and its outlook on the current HPA and economic landscape as well as its position relative to the reverse mortgage industry, RMD sat down with its CEO, Michael Gifford.
Competition with reverse mortgages
When asked about the recent proliferation of shared equity investment products and how that affects Splitero’s competitive position, Gifford posited that the recent HPA increases nationwide have given room to a lot of different players and products to stake their own claims in the home equity tapping space.
“I think there is still plenty of equity and plenty of homeowners that need help accessing that equity,” he told RMD. “I think that while all of the home equity investment products might seem similar, they all have their unique nuances and differences between them. I don’t know if any two are created equal, and what homeowners will find when they’re working with Splitero is that we’re really fast.”
Gifford explains that homeowners can receive funds from the transaction in as little as 10 days, and offers a lower cap “than most” competitors.
“So as they’re pricing things out, there are multiple different portions of the price structure and how it works,” he says. “And so I think in a lot of situations, we’re able to get homeowners more funds at a lower price over the length of their homeownership and we look at this as a 30-year relationship.”
When asked whether he views Splitero as competitive with reverse mortgages, Gifford explained that the company is competitive broadly with any home equity-tapping instrument.
“While there will be some competition for those 62-and-older folks, they also would be completing a HELOC or a traditional refi. I think we all fit in that boat. Outside of that market, we compete with every other finance product. It’s not so much about the competition for us as much as it’s making sure that the homeowner is accessing a product that’s best for them. We really encourage people to explore all 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 any debt-based instrument. However, in terms of starting a conversation about equity tapping, he said the comparison was apt before introducing the specifics of a shared equity investment to a prospective client.
“I would agree that any of the debt-based products are the starting point of a conversation,” he said. “I think this is a better alternative for a lot of homeowners, especially in the environment that we’re in right now with the uncertainty of HPA and rising interest rates. We’re another vehicle that a homeowner with equity can use, and they need to explore each one of those to find the best thing for their circumstance.”
The senior demographic and potential reverse mortgage partnerships
While Splitero is not limited to serving any demographic since shared equity investments carry no age restrictions, Gifford nonetheless views the senior demographic as a potentially important growth area for Splitero going forward, he says.
“Obviously, [seniors] have a lot of home equity, and they may have fewer options than most, to be honest,” he says. “We don’t have an income requirement or any age restriction and there’s no monthly payment, so I would say that fits the mold for a lot of the senior population. There’s also no real restriction on what you’re going to use the funds for. So whether they want to purchase another property, pay for college or just for living expenses or debt, they’re able to do whatever they want with the funds that we’re able to provide.”
Several other alternative equity-tapping providers have previously expressed to RMD that the partnership potential with the reverse mortgage industry — for instance when it comes to referring a client to another product if they may not qualify — is a keen area of interest. When asked about that possibility for Splitero, Gifford expresses a desire to explore those possibilities, as well.
“I think that homeowners are exploring all options, and the business-to-business channel that you’re describing is definitely something we’re interested in,” he says. “Right now, this business is mostly direct-to-consumer. But, we realize that whether it is a mortgage or the ADU industry — since a lot of times people have trouble financing those — or anything else like you describe, then you have a homeowner that can’t qualify for a product. Well, that homeowner still needs help. And so we would love to have those conversations. It is certainly not the focus yet, but it will be very soon.”