Fund Your Home Improvements with Home Equity Access

Noah News By Sahil Gupta - November 24, 2021

With Noah, homeowners have unparalleled financial flexibility, allowing them to access up to $500,000 of their home equity in exchange for a share in the home’s future value - without any interest or monthly payments. 

Over the years, we’ve seen more than a third of our homeowner partners utilize their home equity to conduct home renovations such as updating their roof, renovating their kitchen, or building an accessory dwelling unit (ADU) to house more family members. These home renovations help them improve their quality of life while also adding value to their homes.

As homeowners invest in their homes, we often get asked an important question: “How does Noah account for the home improvements at the end of the agreement?”

At Noah, we believe that if you make significant home improvements that meaningfully enhance the value of your home, you should receive credit for those improvements. That’s why we’ve created the ability to offer homeowners a Modification Adjustment at the end of the term.

The Modification Adjustment enables homeowners to get a credit for the work they’ve done on the property in the form of an adjustment to the ending home value. This final modification adjustment is based on the lesser of:

  1. The value added by the renovations at the time of appraisal; taking into consideration any appreciation, depreciation, or functional obsolescence of those improvements; or
  2. The actual cost of the renovations as determined by the documents submitted by the homeowner

In order to ensure that the homeowners receive the modification adjustment at the end of the term, we simply require that they provide Noah with documentation of the improvements.  This could include photographs, construction drawings, permits or related documentation that would demonstrate the work done. This helps Noah provide a fair and accurate estimate of the adjustment that is applicable for the owner. It’s important to note that minor improvements (less than $5,000 in value) or those done to simply repair and maintain the home are not included in the Modification Adjustment. As part of our partnership with homeowners, we do expect them to maintain the home in a good, livable condition and make necessary repairs as and when required.

Let’s walk through an example, on how the Modification Adjustment would work. 

  • Home initially appraised for $1,000,000 
  • Owner accesses $50,000 of their home equity via Noah
  • Owner utilizes the entire $50,000 for kitchen upgrades and updating their bathroom

Six years later the homeowner decides to sell the property for $1,300,000. When the property is inspected by an independent 3rd party appraiser, they determine that the kitchen upgrades and bathroom renovations are now worth $40,000.  This $40,000 is then applied as a Modification Adjustment credit to the home’s property value, reducing the buyout amount for the homeowner.  

Why $40,000 and not the full $50,000? Well, the appraiser may determine that the kitchen and bathroom has been utilized for the past 6 years and suffered wear and tear, resulting in$10,000 depreciation.

Once finalized, the $40,000 Modification Adjustment will be applied to the ending property value. That means, the Adjusted Sales Price of the home will be $1,260,000 ($1.3M minus the $40,000 adjustment for home renovations).

Therefore, the homeowner payoff to Noah will be computed on $1,260,000 - and ensuring that majority of the benefit of the home renovation, in this case $40,000 in value is kept by the owners.

To see how you can utilize Noah for your home improvements, click here to get an estimate.