Glossary of Terms
Understanding the terminology around Home Equity Agreements can help you make informed decisions. Here are the key terms you should know.
A
Appreciation
An increase in your home's value over time. When you settle your Home Equity Agreement, you share a percentage of your home's future value change with Mend.
Appraisal
A professional assessment of your home's current market value, conducted by a licensed appraiser. This establishes the starting value for calculating future value changes.
B
Buyout
The option to repay your Home Equity Agreement early, before selling your home or reaching the end of your term. You can buy out at any time without prepayment penalties.
C
Closing
The final step in the HEA process where all documents are signed, funds are disbursed, and the investment is officially recorded. Similar to closing on a mortgage or home purchase.
D
Depreciation
A decrease in your home's value over time. If your home depreciates, Mend shares in that loss, which reduces your settlement amount.
E
Equity
The difference between your home's current market value and any outstanding mortgages or liens. It represents the portion of your home that you truly "own."
Escrow
A neutral third party that holds funds and documents during the closing process, ensuring all conditions are met before completing the transaction.
H
HELOC (Home Equity Line of Credit)
A traditional loan product that allows you to borrow against your home's equity. Unlike an HEA, a HELOC requires monthly payments and charges interest.
Home Equity Agreement (HEA)
A financial product that allows you to access your home’s equity in exchange for sharing a portion of your home’s future value. There are no monthly payments. A Final Settlement Amount based on your home's value at that time is due at the end of the Investment Period or upon sale or refinance. In a high-appreciation scenario, this amount may substantially exceed the investment proceeds received.
Home Equity Loan
A traditional loan that uses your home as collateral. Unlike an HEA, a home equity loan requires monthly principal and interest payments.
I
Investment Amount
The cash you receive from your Home Equity Agreement. This amount, minus the Transaction Fee and third-party closing costs, is what you receive at closing.
L
Lien
A legal claim against a property. Your HEA is secured by a lien on your property, similar to a mortgage. This lien is removed when you settle the investment.
P
Primary Residence
The home where you live most of the year. Home Equity Agreements are only available for primary residences, not investment properties or vacation homes.
R
Risk Adjustment
A factor that may affect the calculation of value share in some HEA products. Your specific terms will be clearly explained in your investment agreement.
S
Settlement
The event when you repay your Home Equity Agreement. Settlement occurs when you sell your home, refinance, buy out the investment, or reach the end of your term.
Settlement Amount
The total amount you owe when you settle your HEA. It equals Mend's agreed-upon percentage (Value Share) of your home's total value at the time of settlement. If your home has appreciated, you pay more; if it has decreased, you pay less.
T
Transaction Fee
A one-time fee deducted from your investment proceeds at closing, 4.5% of the investment amount. Third-party closing costs (title, escrow, recording and appraisal) are deducted separately.
Term
The maximum duration of your Home Equity Agreement, typically 10 years. You can settle at any time before the term ends without prepayment penalties.
Title
The legal documentation proving ownership of a property. A title search ensures there are no outstanding claims or issues that would prevent the HEA.
Title Insurance
Insurance that protects against potential issues with the property's title. Required as part of the closing process for your HEA.
U
Underwriting
The process of evaluating your application for a Home Equity Agreement, including verifying property value, ownership, and other eligibility criteria.
V
Value Share
The percentage of your home's future value that Mend receives at settlement. This percentage is determined at the time of your investment based on various factors and is clearly disclosed in your agreement.
Ready to Learn More?
Now that you understand the terminology, explore how a Home Equity Agreement could work for you.
The definitions provided on this page are for educational purposes only and are simplified explanations of complex financial concepts. Specific terms and conditions of your Home Equity Agreement may differ from these general definitions. Please refer to your investment agreement for the exact terms that apply to your situation.