Frequently asked questions
We’re committed to giving you helpful answers to your questions about us and our products. No hand-waving here, just the facts.
General
We’re a financial technology company giving Canadians a new way to tap into their home equity. Before now, Canadian homeowners had to either take on more debt or sell their homes to access their hard-earned equity. We didn’t think those were great options, so we created a new one.
With a Home Equity Sharing Agreement (HESA) from Clay Financial, you can tap into the equity in your home without taking on debt or selling the home you love. We provide an upfront cash payment in exchange for sharing in the future value of your home.
We share in the appreciation (or depreciation) of your home, so our interests are aligned with yours – we win when you win. We make money by sharing in the change in the value of your home over the term of your HESA. We also charge fees to originate and close out your HESA.
We charge homeowners an origination fee at the start of a HESA and a closing fee at the end. The origination fee is 5% of the equity being tapped into at the start of the HESA. The closing fee is the greater of 1% of our share of your home’s appreciation and $500. We also pass along the actual cost of any home inspections, appraisals and fees to register our charge on your property.
Home Equity Sharing Agreement (HESA)
About
A HESA from Clay Financial is a new option for Canadians to tap into their home equity without selling their home or taking on debt. A HESA has no monthly payments and its cost is tied to the future value of a home, providing homeowners with greater flexibility than traditional debt products.
A HESA is a financial contract with two main payments, one at the beginning of the contract and one at the end of the contract. The first payment is from us to you, which represents the home equity that you’re accessing with your HESA. The second payment is from you to us and is equal to the first payment plus our share of the appreciation (or minus our share of the depreciation) of your home since the start of your HESA.
Generally, no! It’s your hard-earned home equity. Use it however you choose.
Yes, though they’re all things you’re already doing, like paying your property taxes and maintaining your home. We’ll check in once per year with a quick compliance survey that you can complete online but otherwise there aren’t many new responsibilities for you.
No. You remain the sole owner of your property. Clay Financial is never registered on title as an owner of your property. We do register a charge to let others know that we have a claim to some of your home’s value with our HESA.
We register a charge on title to let others know that we have a claim to some of your home’s value with our HESA. Registering a charge is necessary when performance of a contract (like a HESA) or payment of a debt is secured by real estate.
No. You own your home and can sell it anytime.
Since we intend our HESA to be a long-term arrangement between us and you, we won’t share in any depreciation of your home if you sell it within the first 5 years of your HESA. This does not prevent you from selling your home but it helps to ensure we are working with likeminded homeowners.
Our HESA has a term of up to 25 years. Your term may end sooner if certain events occur, like if you sell your home or pass away. You can also decide to buy out our interest in your home anytime after the first 5 years.
At the end of your HESA, we’ll calculate the change in the value of your home since the start of your HESA and determine our share of that change based on the terms of your HESA. We’ll then calculate the final payment amount, being the original HESA amount plus our share of the appreciation (or minus our share of the depreciation) and our closing fee and expenses. You’ll send us that final payment amount and we’ll discharge our charge on your property.
Note: If your HESA ends because you sell your home, the final payment to us will usually be made by the purchaser directly on closing to ensure we discharge our charge before they become the new owner of your home.
Availability
Our HESA is currently available to homeowners in the Greater Toronto Area who want to tap into the equity in their principal residence.
We’re working hard to make our HESA available from coast to coast. Use our estimate tool to check if we’re available in your neighbourhood. If not, you’ll be invited to join our waitlist and we’ll send you an email when our HESA launches in your area.
Eligibility
Your home may be eligible for a HESA from Clay Financial if you own it, it is your principal residence, it is mortgaged for less than 75% of its value and it is a freehold or condominium property in an area where we operate.
Yes, though all co-owners must apply for the HESA on the same application. It’s easy to add all co-owners during the application process. Once you’ve done that, we’ll invite them to our platform and create their accounts. There’s no need for any co-owners to create accounts with us in advance.
Yes, if the outstanding amount of all debt secured by your home is less than 75% of your home’s appraised value. You may need your lender’s consent to add our charge to your property. Our charge would be subordinate to your existing mortgage lender’s charge.
If your outstanding secured debt balance is less than 75% of your home’s appraised value but you have a credit limit that could allow it to be more than 75% of your home’s appraised value (such as with a home equity line of credit), we may require you to ask your lender to reduce that limit.
Cost and financials
Generally, we share in the appreciation of your home at a rate of 4 times the percentage of your home’s value being accessed through our HESA. For example, if you tap into 5% of your home’s value with a HESA, then we would share in 20% of your home’s appreciation over the term of the HESA.
We’re in this together, sharing in the upside as well as the downside. Generally, we’ll share in the depreciation of your home at a rate equal to the percentage of your home’s value being accessed through our HESA. For example, if you tap into 5% of your home’s value, then we would share in 5% of your home’s depreciation at the end of the HESA.
However, we do not share in any depreciation if you sell your home within the first 5 years of your HESA. We also do not share in any depreciation if you choose to buy out our interest in your home (i.e., without selling your home).
We’ll arrange for an independent appraisal to determine the fair market value of your home. We then apply a risk adjustment (generally 5%) to that appraised value to determine the starting value for the HESA.
Regardless of the event that triggers the end of your HESA, we will arrange for an independent appraisal to determine the fair market value of your home.
If your HESA is ending because you are selling your home, the appraisal will be used to verify that the sale price represents your home’s fair market value. If the sale price is less than the appraised value, then the appraised value will be the ending value for your HESA. Otherwise, the sale price will be the ending value for your HESA.
If your HESA ends for any other reason (for example, you decide to buy out our interest), then the appraised value will be the ending value for your HESA.