What is an EARN?

An EARN^SM is a new type of home financing product which, unlike a conventional mortgage, has no monthly interest payments. Instead of having to pay interest each month the EARN Equity Note cost is based on your home's future value. With conventional mortgages you borrow money from a lender who receives interest in return for lending you the money to purchase or improve your home. With an EARN Equity Note, there isn't a lender, but rather an investor, who is entitled to a portion of the value of your home when you sell the home, repurchase the note, or pass away.

For a new homeowner, an EARN^SM Equity Note can lower your monthly payment, because part of the purchase price is financed through an EARN instead of a conventional mortgage.
For an existing homeowner, an EARN^SM Equity Note allows you to receive up to half the value of your home equity in cash*. This allows you to refinance your home, diversify your assets, or create a guaranteed income stream in retirement, a huge problem facing the vast majority of Baby Boomers in the United States.

Like a conventional mortgage, an EARN is an obligation that must be paid back. But unlike a conventional mortgage, there are no periodic payments, and no risk of losing your home.

Instead, the EARN is only repaid when you sell your home, upon the death of the homeowner’s or if you choose to repay the EARN. At that time, the investor receives, as payment, a portion of the sale price of the home. If the home price has increased,the investor will share in the appreciation of the home. If the home price has gone down, the investor may absorb a share of the loss. Most importantly –

an EARN is not a sale of your home,
the investor does not share ownership in your home, and
there is no impact on your taxes**

How Does an EARN Work?

Applying for an EARN is similar to applying for a conventional mortgage or a home equity line of credit. Here’s an example of how an EARN may work when applied for:

Your home is appraised by an Independent Appraiser to determine its fair market value. In this example, we will assume that the home is appraised at $600,000.
The investor may offer you an EARN equal to 20% of the current home value or $120,000. The actual offer may vary, similar to how mortgage rates vary.
You sign the EARN Note documents and receive the $120,000.
At some future date when you decide to sell the home, the investor will receive a portion of the sales price as repayment for the EARN. The percentage the investor receives is predicated on you, your home, and the general real estate market. Once the investor fixes the percentage, it is not subject to change. As an example, the investor may give you 20% of the current home value in return for 24% of the future value of your home.

Next: How Can I Use an EARN?

* The amount the homeowner may access with an EARN^SM Equity Note is predicated on the loan to value ratio, credit profile and other factors determined by the investor.

** EARN encourages you to seek professional tax counsel before entering into an EARN Note agreement.