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Understanding Home Equity Protection Plan

IRESE offers a Home Equity Protection Plan to protect your property value against decline below a set price. Consider these reasons to purchase the insurance:
  • You plan to refinance the mortgage in 5 years and worry that the value of the home will fall below the outstanding mortgage balance
  • You plan to sell in 7 years and need to preserve the down payment and protect the equity gains in your home
In essence, your exposure to real estate market price fluctuation is minimized with IRESE’s Home Equity Protection Plan. Let us walk through a specific example.

Property Owner Motivation

As an example, let us take a homeowner who lives in La Jolla, CA and the current property value of his or her home is $1 million, from the last sale date and sale price of the property.

Further, the homeowner is afraid that the property value of the home in 5 years might decline below $0.8 million and he wants to protect home equity decline below $0.8 million.

Homeowner would purchase Home Equity Protection Plan to protect home equity decline below $0.8 million.

Home Equity Protection Plan

Through an IRESE Broker, the homeowner purchases a Home Equity Protection Plan for a specific term of 5 years, with an equity protection value of $0.8 million. Property Owner can get a free quote online. In our example, the homeowner would pay $4,062 today to protect home equity below $0.8 million.

Property Owner Payoff

During the next 5 years, anytime the homeowner needs to sell or refinance the property, Home Equity Protection Plan would cover the loss below $0.8 million. The plan payoff is based on the observed value of the property, which is determined from publicly available price index data.  Learn how property value is determined. If the observed value is below $0.8 million, the homeowner gets the difference between $0.8 million and the observed value. In our example, if the value is $0.6m, the homeowner receives $0.2m ($0.8 less $0.6).

Home Equity Protection Plan protects against broad property market price declines that is beyond the control of property owners.

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