What is Downside Protection?
Downside protection in owner-occupied residential real estate refers to measures taken to protect homeowners from financial loss in case the value of their property decreases. It’s becoming increasingly important as the housing market is facing a decline, and more consumers now believe home prices will fall in the next 12 months.
Winter is Coming
Up until today, when potential homebuyers were looking for downside protection, their only options were either purchasing mortgage insurance, making a larger down payment to secure a larger share of equity, or purchasing a property in an area with a strong track record of maintaining property values. That’s hardly the downside protection that can protect your equity when privately owned properties face a steep depreciation. Lenders protect themselves, and as the 1st lien, they hardly suffer any loss when house prices drop - as opposed to homeowners, who’s equity is the first to go. If we’re interested in picking up the pace of home sales, borrowers need downside protection, now more than ever.
The Risk-Transfer Mortgage™
The RTM™ (Risk-Transfer Mortgage™) by Contigo Capital is a simple loan, for everyone. It offers better terms, a reduced down payment with no need for PMI, and significantly lower monthly payments. The RTM™ exchanges downside protection for a portion of your home’s future value, so you can buy a home and grow your wealth, even with the current interest rates. But with the RTM, downside protection means exactly that: if prices continue to drop, your home equity is protected and will not be wiped out like in other mortgage products. Since real estate investors around the country expect a continued decline with this current environment, it looks like downside protection will be the real game changer of 2023.