REX Agreement

Definition of 'REX Agreement'


An alternative to a home equity line of credit (HELOC) and refinancing that allows homeowners to access the equity in their home. The agreement is offered by REX & Company, and it gives homeowners a cash payment of 12 to 17% of their home's market value under the stipulation that REX & Company receives 50% of the increase in the house's value when it is sold.

This program is designed for homeowners with above average credit, with single-family detached houses. In addition, homes valued in the top or bottom 10% of their local market cannot participate.

Investopedia explains 'REX Agreement'


For example, if you own a house worth $400,000 and you sign a REX agreement, then you could be eligible for a cash payment of $48,000-68,000. For the purpose of this example, lets say you took $50,000. If you sold your house 10 years later for $600,000, you would owe REX & Company $150,000, calculated as the return of the initial payment plus one half of the increase in your homes value ($50,000 + [$200,000/2] = $150,000). In this example, you would have paid an annualized interest rate of 11.6%.

Here is another example, where the results are not as pretty. As in the above example, your house is worth $400,000 when you sign the REX agreement, and you are given a lump sum payment of $50,000. Let's say that there is a family emergency, and you have to sell your home two years later for $425,000 (approximately 3% growth rate per year). In this case, you would owe REX & Company $62,500. If you still owed $370,000 (a definite possibility if you had a mortgage with a long amortization, had a small downpayment, or had an interest-only mortgage), you could be out of pocket $7,500. In this example, the annualized interest rate was 11.8%.

Depending on your individual financial situation, this may or may not be an acceptable strategy. Prudent home owners should talk to a financial professional about their options before deciding on any method of accessing the equity in their home.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center