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Wednesday, February 19, 2025

Q&A with Splitero CEO Michael Gifford: An Insider’s Take on the Booming Home Equity Market

Qa With Splitero Ceo Michael Gifford An Insiders Take On The Booming Heloc Market
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Cash-strapped Americans are increasingly turning to home equity lines of credit (HELOCs) to finance their lives. In 2022, HELOC activity hit a 15-year-high. Activity for HELOCs has since cooled slightly from its 2022 peak, while remaining strong. 

A HELOC allows you to borrow funds against the equity in your home. Inflation and wage stagnation combine to create economic stressors for many Americans, and HELOCs provide a way for consumers to boost their purchasing power while taking advantage of their home’s value.

An expanding HELOC market may create more competition for credit card issuers and alternative lenders. We sat down with Michael Gifford, CEO and Co-Founder of Splitero, to get his thoughts on the home equity landscape as 2025 kicks off.

Splitero enables homeowners to access their home’s equity without taking on new debt or adding monthly payments, allowing them to renovate their homes and cover the costs of emergencies without taking out loans. They do this through an alternative home equity product called Home Equity Investments (HEIs), which have less burdensome qualification criteria than HELOCs. HEIs have no income or employment requirements and flexible credit scores.

I’ve edited a transcript of our conversation with Gifford for brevity and clarity.

What attracted you to start a business that offers an innovative way for consumers to extract value from the equity in their homes? 

Within the home equity investment space, I saw a massive opportunity for homeowners who traditionally only had debt alternatives. What Splitero does with our home equity investment is we offer homeowners cash now in exchange for a share of the future value of their home. 

That really helps homeowners in today’s economic and interest rate environment to access the equity they’ve built up in their homes 

We’ve covered the popularity of HELOCs and how some can use them as a substitute for credit cards. To what do you attribute the increased attention on HELOCs?

Most homeowners who want to access the equity in their house think about HELOCs, which provide them a large opportunity to do just that. There are a few reasons why HELOCs are booming right now, in my opinion.

Many homeowners are in a 30-year fixed loan with a substantially lower interest rate than they’d be able to get today. Because of that, there’s a lack of housing inventory on the market.

Homeowners who in the past would have sold their home, taken some of that equity off the table, and bought another house just aren’t doing that as much because there’s nothing to buy. And what is available for them to buy isn’t really a step up from their current housing situation. 

Homeowners should know that HEIs provide homeowners with better options to access their home equity that have less burdensome qualification criteria and no monthly payments.

You touched on how advantageous HELOCs can be for homeowners. What are some disadvantages consumers considering opening a HELOC need to be aware of?

People need to know that HELOCs can come with fixed or variable rates. So, if the interest rate environment changes, their payments could change.

You also have to be careful of utilization fees. A lot of people get a HELOC and don’t start using it right away, and there could be fees associated with that approach.

The time it takes to get a HELOC is another factor that isn’t ideal. You’re typically going to be dealing with a bank, which means a pretty thorough underwriting process that can take 45 to 60 days to complete.

CPI chart
Source: U.S. Bureau of Labor Statistics

Of course, once you do start using the funds, you’re going to have an additional monthly payment, which a lot of consumers are weary of in this environment. The cost of living is still expensive, and nobody really wants an extra monthly payment right now.

But the ultimate drawback of any product where you put a lien on your house is that if you don’t pay, there could be a foreclosure scenario. Depending on the term, you also could be looking at a large balloon payment that’s going to be due in the near future.

What’s unique about Splitero’s home equity investment is we actually match the term of the customer’s first mortgage up to a maximum of 30 years. So even if you have 22 years left on your first mortgage, we can match that.

In comparison to credit cards, what sort of flexibility do HELOCs or HEIs provide?

When people are trying to access their home equity, they have a bigger base of money to draw from than they might with other products, due to home values being high. But that doesn’t mean they have full access to that equity. Their credit score and their debt-to-income ratio could inhibit their ability to access all the equity in their homes.

Wages haven’t risen as much as home values have, so a lot of people may have trouble getting qualified to access all the equity they’ve built up in their homes if a lender requires income verification. 

What are you and your company looking forward to in 2025?

I would say that Splitero is very excited about 2025 as homeowners have a massive opportunity to access the equity they have in their houses. With interest rates still being high and housing inventories remaining low in most parts of the country, there are a lot of alternative solutions to using a debt-based product like a HELOC.

I’d advise anyone who’s thinking about getting a HELOC or a reverse mortgage to look at what else is out there, including a home equity investment. Splitero offers a lot of nice features, including no monthly payments and quick funding. It really behooves anyone that’s making a large financial decision to investigate all of their options.