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Overview

52 million homeowners have significant home equity wealth, but for many, debt products like home equity loans and home equity lines of credit aren’t the answer. Point’s technology platform makes it easy for homeowners to make smart financial decisions about unlocking the wealth trapped in their homes, without taking on new debt.

Their Story

Eddie Lim had built four venture-backed businesses and was ready to start a new one when he hit upon a major pain point in the marketplace. Lim owned a home in the Bay area and wanted to refinance his mortgage so that he could use some of the money he’d put into his home toward his latest business. But the big banks didn’t agree with him. Because Lim was between jobs and had no income to report, refinancing his home was seen as a liability by banks. “I had so much theoretical wealth in my home but I couldn’t access it,” he says. “I started talking to people I know in the mortgage and real estate industry. I asked: ‘Why doesn’t this exist? Every major market has debt and equity, why not this?’”

The more people Lim spoke with and the deeper he dug into this question, the more convinced he was that there was room in the marketplace to restructure the way home equity is accessed by its owners. “For most homeowners, their home represents their single biggest asset and the majority of their net worth,” says Lim. “From a wealth diversification perspective, that’s like having a single stock in your investment portfolio.”

In the U.S. alone, this amounts to a whopping $17 trillion of equity tied up in people’s homes after mortgage debt – more than twice the value of the entirety of the NASDAQ, according to published reports from Zillow and the Federal Reserve. “This is an incredibly big market we are talking about,” says Lim. “If we unlock even a fraction of that, even one percent, that’s $170 billion sitting in people’s homes. It’s an interesting way to think about how you jumpstart the economy.”

The question, of course, becomes: How to pull that off? In January 2015, Lim did an initial round of funding to help get his idea, which he called Point, off the ground. He needed to figure out how to structure his business – building the technology and determining how to legally execute a transaction for a new consumer finance product. Point exists at the intersection of a handful of industries including real estate, capital markets, mortgages, title insurance, and servicing. “This is a new asset class. It literally doesn’t exist,” says Lim. “That means there is no playbook for what we are doing. Even just getting out of the gate was challenging.”

Point works by making it possible for homeowners to sell small chunks of equity in their homes to investors as a way to get access to cash without having to take out a loan or pay interest rates. For investors, there is the potential benefit of sharing in the equity growth of a home over time once it’s sold. For example, say your home is valued at $350,000 and Point invests 10 percent of its value up front, giving you access to $35,000 in cash. Since Point isn’t a loan, there’s no monthly payment for the homeowner. When the homeowner decides to sell or refinance her home, Point shares in the appreciation of the home if it has gone up in value. Point also shares in the depreciation of the home if it goes down in value. In this example, Point might share in approximately 25 percent of the appreciation or depreciation for its $35,000 investment. “It’s good for you and it’s good for us when your home value goes up,” says Lim.

For the consumer, the process is very similar to the online mortgage experience. A homeowner fills out a brief online application and then has a quick call with someone from Point. After a preliminary offer is given, a third-party appraiser is sent to the home. While Point isn’t a mortgage or loan, the company follows consumer protection standards in place for mortgages, requiring a three-week waiting period. “There are a lot of consumer protections in place for mortgages and we wanted to follow all of those waiting periods,” says Lim.

Point customers tend to fall within the age range of 35 to 55 years and to have owned their home for at least five years, enabling them to have accumulated enough equity that they can sell. While the product is not for everyone, Point is especially useful to homeowners who are looking to cover the cost of a specific crucial life event or expense. For example, an investment might go toward the cost of expensive fertility treatment or other major healthcare bills. It might go toward paying off credit card debt in order to help bump up a credit score as much as 100 points in three to four months.

Homeowners can also use the equity to cover the cost of renovating part of their home as a way to increase the overall value of the home before selling it. “The number one thing that unifies our customer base is that they are at some point in their life where they are optimizing for cash flow,” says Lim.

Point makes money by charging consumers an up-front three percent closing fee. When selling investments to investors, Point also takes a fee from those purchases. Lim and his team don’t claim to have invented a new way of accessing equity, but rather developing a streamlined and newly regulated technology that makes accessing that money simple and secure. “The concept has been around for a long time, but productizing it is what’s new,” says Lim. “The idea is easy, but how do you actually execute on it?”

What They Do

Key People

Eddie Lim

Founder & CEO

Location

Palo Alto, CA

Website

www.point.com

2017 Challenge Winner
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