Frequently Asked Questions

About the EARN Equity Note

Q: What is an EARN^SM Note?

A:An Equity Asset Redeployment Note™, (an EARN Note) is a new type of home financing product that is different then conventional mortgages. The EARN Equity Note can be used as a method of financing or refinancing a home purchase or as a method of extracting equity from your current home. If you own a home, the EARN Note allows you to convert a portion of your home value into cash for the purpose of reinvesting the funds for retirement, second home purchase, immediate income, and/or college savings plan(s). If you are looking to buy a home, you can use the EARN Note to reduce your monthly payments by reducing the amount of money you need to borrow.

Q:What are the benefits of an EARN Note?

A:There are three main benefits of an EARN Equity Note:

No Debt Obligations
Unlike conventional home mortgages and home equity products, an EARN Equity Note is not a loan or a line of credit. This means 100% of the money, less any origination fees, goes to work for you immediately with absolutely no debt obligations to you.
The Power of Diversification – “Don’t Put All Your Eggs in One Basket”
Always review your investment portfolio with your Financial Representative. If a disproportionate amount of your net worth is locked-up in your home, an EARN Note allows you to achieve greater diversification in your investment portfolio by converting a portion of your home value into cash, an asset that can be invested and managed in a manner better suited to your long-term goals. Additionally, an EARN Equity Note is the only financial instrument of its kind that creates diversification by unlocking a portion of your home value without a significant cost or risk of misspending the money on consumables instead of your financial objectives.
Below is a hypothetical example that illustrates how a portion of the home value is converted to cash and then invested in stocks, bonds, and cash to create greater diversification within the portfolio.
Fund Long-Term Objectives
Proceeds from an EARN Equity Note may be used to fund investments for the long-term financial benefit of the homeowner(s). Examples of long-term financial objectives include:
- Short, moderate and long-term Retirement Savings
- Generation of current income through structured income programs including options for lifetime guaranteed income
- Affordable home ownership
- College Savings Plans that reduce or eliminate current cash flow constraints
Discuss with your Financial Representative which investments may be most appropriate for you and your financial goals.

Q:How do I obtain an EARN Note?

A:There are 4 simple steps to obtaining an EARN Equity Note.

Complete the EARN pre-qualification form to determine the estimated portion of your home value that may qualify for an EARN Equity Note, if any.
Submit your EARN Application. Based on the information provided on your application, The EARN Group will:
- Evaluate your Real Estate portfolio using state of the art underwriting technology;
- Review your credit history, property insurance coverage and existing financial obligations;
- Confirm that you qualify for an EARN; and then
- Schedule a home appraisal with an independent Certified Appraiser.
Determine your available home value. The EARN Note investor will review your home appraisal along with your application and can offer to pay you up to 50% of your home appraisal value. You must then determine how much of this offer you would like to accept to convert into an investment using an EARN Equity Note.

Hypothetical Example
Independent Appraisedl Value = $600,000
EARN Note Investor's Offer = $300,000
You may convert up to $300,000 into a personal investment using an EARN.
Complete the EARN Equity Note agreement and related documents to turn a portion of your home value into a personal investment. The EARN Note contract is an agreement between you and the EARN Note investor that defines the terms of turning a portion of your home value into an investment to benefit you, the homeowner(s). In its simplest form, the EARN Equity Note states:
- You, the homeowner , agree to sell a portion of your home's future value to the financial institution.
- The EARN Note investor agrees to give you cash for the determined amount, and in return, secures its position behind any other property lien holders such as a first or second mortgage holder. The EARN Note entitles the investor to the an agreed upon percentage of your home's future value when you sell your home, pre-pay the EARN Note or die. If your home goes up in value, the financial institution makes money. If your home depreciates, they may lose money .
- You, the homeowner, have the flexibility to utilize the proceeds in a wide range of investment options that are suitable for retirement saving, college saving, or retirement income. You may also deploy the proceeds to refinance your existing mortgage, for the purchase of a second home or to pay down your existing mortgage.

Q: Can an EARN Note result in me losing my home?

A: No. Unlike a conventional mortgage or home equity line of credit, there is no payment on the EARN Note until you sell your home, pre-pay the EARN Note or pass away. That means that an EARN Note will never result in you losing your home. However, you must continue to maintain your home, pay your mortgage, insurance and property taxes to be in compliance with the EARN Equity Note terms.

Q: Do I have to pay back the cash that I receive from the EARN Note Investor?

A: No. Unlike home mortgages and home equity products, an EARN Note is not a loan or line of credit. This means 100% of the money, less any origination fees, goes to work for you immediately.

Q: How does the EARN Note Investor determine how much of my home value they’ll offer me in cash?

A: The EARN Group initiates a process including an independent appraisal, a credit check and other related information gathering necessary to determine your EARN Score. Your EARN Score will assist the EARN Note investor in determining how much of an EARN note you will be eligible for and what the percentage of your home's future value will be paid to the financial institution when the note is paid off.

Q: Why can the EARN Note Investor offer me up to only 50% of my home value? Why can’t I get more?

A: Investors want you to have a vested interest in protecting the value of your home. EARN Notes in excess of 50% do not provide the necessary incentive for the home owner. Realistically, most investors will only provide an EARN note for much smaller percentages unless you have no other loan on your home when you take out the EARN Equity Note.

Q: Can I have multiple EARN Notes on one property?

A: It isn't likely that you would have an investor wanting to put a second EARN Equity Note on a property. You would be better advised to pay off your current EARN Note and get a new EARN Note. Be certain to have your qualification for the new EARN confirmed before pre-paying your current note.

Q: Are there fees associated with the EARN Note?

A: Origination fees vary depending upon your state of residence. They can range from a minimum or $500 to $1,000 plus up to .25% of your appraised home value. There is an Annual Servicing Fee of $250.

Q: But my conventional mortgage doesn't have an Annual Fee?

A: Actually, all mortgages have fees for servicing the loan. With conventional mortgages these are build into the interest that you pay on the loan. With EARN equity mortgages and reverse mortgages these fees must be paid by the homeowner on an "as you go" basis.

Determining Your Home Value

Q: Is the EARN Note for a percentage of my home value or home equity?

A: Home Value = the amount your home is appraised for.
Home Equity = the amount your home is appraised for minus the amount of mortgage debt remaining on your home.

The EARN Note investor may offer you up to 50% of your home value (the amount your home is appraised for by an independent appraiser). You and your financial representative decide how much of this offer to convert into an investment using an EARN Note.

Q: Is there a minimum or maximum amount of the financial institution’s offer that I can accept?

A: You may accept up to 100% of the financial investor’s offer.

Q: Can I use my own home appraiser?

A: No. To be sure you obtain the most accurate home valuation possible, an independent Certified Appraiser will perform a comprehensive appraisal and on-site inspection of your home.

Q: Who is an independent Certified Appraiser?

A: The EARN Group has secured the services of a nationwide network of appraisers conforming to the highest certification standards in their profession. Contact the EARN Group to determine a qualified appraiser for your area.

Q: Do I have to pay for the independent EARN Certified Appraisal of my home?

A: The independent Certified Appraisal is paid by you and deducted from the proceeds of the EARN Note. However, if you decide not to execute an EARN Note, the cost of the appraisal will be passed on to you.

Q: Will my house continue to be appraised after the EARN Note is originated?

A: Yes. Under the terms of the EARN Note, the EARN Group has the right to obtain subsequent appraisals for quality control, analytical, and other purposes. However, most appraisals after the initial appraisal can be done through existing data sources and will not require an appraiser to enter your home.

Terminating Your EARN Note

Q: What happens if I sell my home?

A: When you sell your home that has an EARN Note in place, a final independent Certified Appraisal will be conducted either before or after the purchase. If the independent Certified Appraisal is done before the sale, you have an excellent benchmark for pricing your home.

When your house is sold, you’ll need to make the following payments in the below order:

Any remaining payments on mortgage loans or home equity lines of credit that were established prior to finalizing your EARN Note.
The current value of the EARN Note will be paid to the financial institution holding the EARN Note at the time of the sale. For example:
- If your EARN Note was for 20% of your home value when it was initiated;
- When you sell your home, the financial institution holding the EARN Note will receive a percentage of the appraisal value at the time of the sale. This is the amount that you agree to when you take out the EARN and will be based on market conditions at that time. For example purposes we will us 24%.

Hypothetical Example #1- You sell your home and it has appreciated.
On January 1, 2006, you receive an independent Certified Appraisal for $350,000 and secure an EARN Note for 20% of home value = $350,000 x 20% = $70,000.

One year later you sell your home for $450,000 and the amount is certified through appraisal. You owe the financial institution holding the EARN Note 20% of the home value = $450,000 x 24% = $108,000

Hypothetical Example #2– You sell your home and it has depreciated.
On January 1, 2006, you receive an independent Certified Appraisal for $350,000 and secure an EARN Note for 20% of home value = $350,000 x 20% = $70,000.

One year later you sell your home and receive an independent Certified Appraisal for $250,000. You owe the EARN Note investor holding the EARN Note 24% of the home value = $250,000 x 24% = $60,000

Q: Can I buy back the percentage of my home value from the financial institution?

A: Yes. You may pre-pay the EARN Note at any time based on the home value at the time of prepayment, which is determined by an independent Certified Appraisal. Your payment amount will equal the greater of the percentage of your home value that the EARN Note was originally written for or the amount of the pre-payment made to you by the investor. In either of our examples from above, 24% of the appraised home value or $70,000, whichever is greater. Should you decide to buy back your EARN Note, you will have no future obligation as it relates to the EARN Note you have repurchased.

Q: What happens to the EARN Note upon the death of the homeowner(s)?

A: The EARN Note becomes part of the last surviving homeowner’s estate upon his/her death. The EARN Group will schedule an independent Certified Appraisal of the home once notified of the death. The estate is then responsible for paying the EARN Note investor the value of the EARN Note within 6 months of death. Under some circumstances the investor may consider allowing the EARN Note to remain in place, subject to an agreed upon amendment to the EARN Equity Note.

General Information

Q: Do I continue to pay property tax now that a percentage of my home has been sold to another party?

A: Yes. You will continue to pay your property tax bill.

Q: Are there any state tax issues I should be concerned with by selling a portion of my home?

A: Property tax regulations are complex and vary by state. Please consult your Financial Representative and/or Tax Advisor regarding any tax implications with respect to the issuance of an EARN Note.

Q: Can I take out an EARN Note on my timeshare?

A: No. You must be the sole owner of the property and it cannot be in a rental pool. Basically you must adhere to the same test the IRS uses for purposed of determining an investment property versus a second home. Speak with your tax advisor for a more detailed explanation.

Q: How does an EARN compare to other forms of home equity-related financing?

A: The table below compares several forms of financing to EARN Notes.

	EARN Note	Mortgage Loan	Home Equity Line of Credit	Reverse Mortgage (age 65+ to qualify)
Primary Purpose	Long term planning (diversification, retirement, college, living income)	Buy a home	Improve home or buy other goods	Living income
Fees (all include appraisal, title insurance, escrow)	Origination, Servicing, and Transactions	Points, origination fees	Origination, annual credit line fees	Approximately 6-9% of loan amount, plus ongoing monthly fees and insurance costs equal to .5% of the outstanding indebtedness
Payment & Interest Terms	No payments or interest; note settled on death, sale of home or other predefined event	Fixed or adjustable interest rate	Prime + fixed or variable interest rate	No payments; note plus accrued interest settled on death or sale of home
Tax Treatment on Interest Paid or Accrued	None	Deductible interest up to $1M	Deductible up to $100K	Deductible interest after loan is paid off in part or in full.