There's a new company out there called Real Estate Equity Exchange that will help you pull equity out of your home without all the downside of taking on more debt or having to make payments. Or, at least that's what they advertise!

They will give you cash representing up to 15% of the value of your home. In exchange for this cash you give them up to 52.5% of the capital appreciation when you sell your home. In addition, you pay a service charge of $15,000 when you sell the house.

This does not seem like a good deal to me. That seems like potentially a lot of equity to give up for what you get.

This is likely to be most attractive to older owners who would otherwise be looking at a reverse mortgage. The reverse mortgage carries a service charge of $17,000 and current interest rates are somewhere around 6.5%.

The company says one of the reasons that it doesn't sound as attractive is that they are sharing the risk with the homeowner. So, if there's very little appreciation in your home, they make very little money.

While I'm skeptical of this deal it's apparently a big hit in the investment community with people lined up to throw money at the company and invest in these mortgages.

One thing is for sure, the financial options available to consumers are growing increasingly complex and "buyer beware" is definitely a good principle to apply. If you're contemplating any reverse mortgage or utilizing this new offering, make sure you do your homework! AARP has some good information on reverse mortgages. And you'll find some resources on this topic on my web site as well.

If you're unsure, don't hesitate to seek professional guidance from someone who isn't trying to sell you something!

Americans are taking enormous amounts of equity out of their homes. That "giant sucking sound" that Ross Perot heard from south of the border is now the sound of billions of dollars of equity being sucked out and, in many cases, thrown away.

The numbers over the last few years are pretty remarkable:

While some of this equity was taken out for items that have the potential to increase the homes value (35% was for home improvement), much of it did not.  42% was spent on consumer purchases, or, in other words, to buy more stuff!

As we head into a period of time when much of the country is likely to see significantly slower appreciation than we have over the last few years this is worrisome. Add to this the number of homeowners who bought their homes with interest only and/or adjustable rate mortgages and it can get very frightening.

My concern for the overall real estate marketplace is that there are large numbers of foreclosures coming. If that should happen the downward pressure on prices is likely to be more significant than what we've seen with the current market slowdown.

And, of course, in the larger economic picture this would be very bad news for the economy and certainly has the potential for sending us towards recession.

So...if you've been contemplating taking out that home equity loan, think about it again! If you've already got one, time to work on paying it off as soon as possible.

And, if you've been wondering about selling your house and worried about the current market this certainly factors into considerations about timing. While it may seem like a tough time to sell, there are no guarantees it's better a year from now!