Proptech Firm Rook Capital Offers Help With Home Down Payments

Proptech firm Rook Capital announced that it was partnering with brokerage Keller Williams Northern Colorado and FirstBank to provide a shared equity home purchase approach in Colorado.

The concept is that many people can’t afford to purchase a house, often because they lack sufficient funds for a down payment. Rook offers an investment partnership in the form of a loan that can run from $50,000 to $350,000, based on home value, creditworthiness, and current equity.

There are no monthly payments to Rook or accruing annual interest. Instead, Rook and its investment partners take an equity share of the home with a lien. The loan—a mortgage—is due in 10 years after signing.

Within the 10-year period, the borrower can pay off the loan, which is the share of home appreciation or depreciation. That is basically a balloon payment for the home buyer. If the people don’t have the money for the final payment, Rook says that it can help with “refinancing options through our partnerships with various traditional lenders.” If none of those options work, presumably the buyer would have to become a seller.

This may sound in part like a reverse mortgage, but Rook says there are differences.

“While both allow you to ‘tap into’ your home’s existing equity to obtain cash with no monthly payments, there are some key differences–the main one being age requirements. Typically you need to be at least 62 years old. Generally, fees and costs are higher, there are ongoing fees (for example, Mortgage Insurance Premium), and annual interest continues to apply/accrue (regardless of how your home value changes). A reverse mortgage also usually requires a first lien position, so you would have to pay off any existing mortgages with the loan funds. And a reverse mortgage is not assumable by your heirs so if you die, the entire loan will become due within 12 months.”

Because of the equity stake, Rook and its investors make money through property appreciation or lose funds through depreciation, depending on the state of the market.

FirstBank would provide the first mortgage on the property. Rock Capital offers up to 25% of the purchase price for down payment and closing costs.

Rock states in its press release that it “leverages advanced data-science and modeling to identify locales and properties that offer the best prospects for return.” The firm has a variety of investors, including LL Funds, First Mile Ventures, Kickstart Fund, Service Provider Capital, and Tango Ventures.