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Homeowners with most of their equity tied up in their house often turn to home equity lines of credit or reverse mortgages to get cash for retirement, start new businesses or do expensive renovations. But would-be borrowers hesitant about taking on debt have an unusual option from San Diego-based EquityKey: tens of thousands of dollars interest-free in exchange for a share in their home's appreciation.
EquityKey doesn't offer loans. Instead, it hands over a one-time payment from investor funds. Once the house is sold or the title is transferred, EquityKey gets its money back, plus a cut of the home's appreciation. Co-founders Jeffrey Nash and Eduardo Lombardi said they got the idea in 2004 and incubated it at Centara Capital Management Group Inc., which serves San Diego retirees.
"We could buy a piece of the property that they didn't want or need anymore - its future growth - in a way that wouldn't erode the nest egg they had built," Nash said. "As opposed to debt, why not, in essence, buy equity?"
The pair sold the concept to an arm of Belgium-based KBC Bank and ran the business for the bank through the financial crisis. By then, KBC halted its domestic operations and headed back to Europe. Nash and Lombardi bought EquityKey's intellectual property...