A new Silicon Valley fintech startup with impressive investor backing might be poised to tackle one of the biggest problems plaguing the real estate industry in 2016: affordability.
Point is an investment platform that allows homeowners to give up a share of ownership in their home in exchange for a smaller monthly mortgage payment.
In addition to monthly savings, Point co-founder and CEO Eddie Lim says the platform allows homeowners to access their home equity wealth without taking out a loan.
Lim and the Point team are that much closer to bringing the “new asset class” to life after raising $8.4 million in Series A fundraising from investors such as Andreessen Horowitz, the powerhouse behind companies such as Facebook and Airbnb, Bloomberg Beta, Ribbit Capital and more.
“Point has built a great team going after a huge market with an innovative solution that solves a real need for their customers. That checks all the important boxes for us,” said Alex Rampell, an investor from Andreessen Horowitz and newly appointed Point board member in a press release.
“The progress since the company’s founding has been exceptional and has surpassed our expectations.”
This brings the company’s total funding to $15.4 million, and the Series A funding will allow them to expand from California and Washington into three other unnamed markets by the end of the year.
How Point works
Point allows homeowners to sell a portion of their home to investors in exchange for a lump sum of capital that ranges from $40 to $250,000 without interest rates or monthly payments.
To get the ball rolling, homeowners must go through a five-minute qualification process where they’re asked to provide information about themselves and their household finances.
To be pre-approved, the homeowner must retain at least 20 percent of the equity in the home after Point’s investment.
From there, Point will provide a provisional offer that is 5 to 10 percent of your home’s current value. Next, the company will send a licensed appraiser to determine the home’s actual value, and that price will be used to finalize the offer.
Lastly, Point will file a Deed of Trust and Memorandum of Option with your county’s recorder’s office. Once the filings are done, Point will electronically transfer the capital into the homeowner’s account, minus a 3-percent processing fee and additional escrow fee.
If a homeowner moves from the home within 10 years, Point will be automatically paid from escrow. If the homeowner doesn’t sell, he or she has the option of buying back Point’s portion of the home at the current appraised property value.
Transforming the home equity financing landscape
Lim says Point’s system puts homeowners in power by eliminating the need for borrowing against the home through equity refinancing, home equity loans or home equity lines of credit.
“Point is fundamentally transforming the home equity financing landscape,” said Lim in a press release.
“Homeowners can now access their home equity wealth without a loan, without monthly payments, and without a fixed interest rate. This is a truly revolutionary product that aligns the investors and homeowners in a way we haven’t seen before.
“There’s $18 trillion of U.S. residential real estate equity wealth that is locked up. We want to put that wealth to productive use.”