Startup Opening Equity Floodgates

Home equity is high in the U.S., but many homeowners are unable to tap it, without qualifying credit scores for equity or cash-out refinance loans. One startup aims to open the floodgates, for a price.

CEO of startup EasyKnock equity release solutions, Jarred Kessler, explains to CNBC, "EasyKnock is a company that is allowing people to access equity in their home that have been shut out by the traditional lending market," adding, "Around 23 percent of the housing market has built up equity in their home and they can't release it. That's due to FICO score, about 15 million small-business owners who have been shut out by the credit markets, or people who have missed a credit card payment or mortgage payment."

EasyKnock's model is not, however, a traditional investor purchase. The company gives the homeowner about 70 percent of the appraised value of the home. This protects EasyKnock from any depreciation in the home over the term of the lease and simultaneously gives the homeowner a future stake in any appreciation in the home's value. That is because at the end of the lease term the former homeowner must either buy the home back or sell it to someone else. If they choose to have EasyKnock sell, they get the full value of the sale, including appreciation, minus the 70 percent EasyKnock paid and minus a 1.5 percent commission on the final sale price.

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