Knock Lending LLC introduced two new features on Tuesday that allow homeowners to tap into equity gains they've amassed in their house to make buying a new home more affordable.
Homeowners who use the Knock Home Swap, which includes a competitively priced mortgage and 100% of the financing necessary to buy before you sell, are eligible to use the Home Swap's interest-free home-equity advance to lower both the interest rate and monthly payments on the new home.
Consumers can buy down their mortgage rate by as much as 0.75% and make up to a 30% down payment on a new home, which would reduce their monthly payment by as much as an additional one-eighth of a percentage point, Knock said.
"With mortgage rates doubling since the start of the year and home prices continuing to grow at double-digits, buying a home has gotten a lot more expensive. At the same time, homeowners have more of their wealth tied up in their home than any other time in history," said Knock co-founder and CEO Sean Black.
"Thousands of homeowners have used the Knock Home Swap to work with the agent they trust to compete with cash offers to win their dream home and then move on their own timeline and sell for top dollar," Black said. "Now, they can use it to buy down their rate and put more money down, which will drive their rate even lower."
In just a year, the typical U.S. homeowner has seen their home equity increase $55,300 in 2021, according to CoreLogic. With the median-priced home reaching a record of $416,000 in June, equity has only continued to increase in 2022.
A homebuyer purchasing a median price home could reduce their mortgage payment by nearly 14%, or $259 a month, by leveraging the Home Swap's no interest equity advance to increase their down payment from 20% to 30% and qualify for a lower interest rate, Knock said. Paying a point to lower the interest by 0.5% would trim an additional $90 per month, saving more than $32,000 over the life of the loan, Knock said.
Knock said its interest-free equity advance loan covers the down payment on the new home, home prep, and up to six months of mortgage payments on the old house. Home Swap customers can sell their old house on the open market for the maximum sale price after they've moved into their new home, which avoids the hassle of living through repairs or showings, the company said.
Knock also provides a 30-day closing guarantee and backup offer on the old house in the unlikely event that it doesn't sell within six months. More than 98% of Knock homes sell in 90 days or less, with 88% selling in 30 days or less, the company said.
