Unlike traditional home-equity based loans, Noah provides debt-free financing in exchange for a … [+]
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An alternative medicine practitioner, Tracy has partnered with more than 100 supplemental brands throughout her career, representing them at various engagements and helping them find space on the shelves of food stores. After a cancer diagnosis in 2014 pushed her to overhaul her diet, however, she set out to create her own healthy snack – sugar-free and gluten-free cream-filled cookies.
“My friends were so excited about it,” says Tracy, who withheld her last name due to financial considerations. “My colleagues were so excited in the industry that they encouraged me to turn it into a product line, especially since I have all these national connections for getting natural products into retail stores.”
Thus, a business was born.
Early this year, Tracy, who lives in Colorado Springs, Colorado, needed money to jump-start her company. She had to design the packaging, lease a commercial kitchen and ship cookies for shelf-life testing, among other pre-launch tasks.
In January, Tracy began pursuing a home equity loan, hoping to receive up to $75,000 secured by her 3,500-square-foot residence. Once the coronavirus struck the U.S., however, the lender pulled away, along with scores of others who suspended home-equity products.
Left with few options, in early April, Tracy discovered Noah, a company that provides upfront, debt-free financing in exchange for a slice of homeowners’ equity in their abodes. (The share of home equity Noah demands depends on the size of the loans.)
“I loved the way you can collect money from your home, but it doesn’t sit on your credit report,” Tracy says. “There isn’t a monthly obligation [to repay Noah]. When you are starting a new brand, that’s a very costly endeavor and I didn’t want to take on more debt than I needed to.”
Through Noah, she unlocked $30,000 from her home’s equity in addition to a $1,000 through the firm’s Covid-19 relief efforts.
“It wasn’t as much as we were hoping for, but we were grateful to have got what we got,” Tracy says. “So many other companies were not issuing home equity loans. Noah was definitely a blessing.”
Headquartered in San Francisco, Noah (formerly known as Patch Homes) differs from home equity loans and lines of credit in that it eschews interest rates and monthly remittances. Instead, the company shares the appreciation – or depreciation – of a home, with the loan (and the equity amount) coming due in 10 years or at the time of sale.
Noah “solves the core problem, which is a cash-flow problem, for consumers,” says Noah founder Sahil Gupta. “It solves the liquidity problem for consumers without adding additional debt burden, without financial anxiety, and it expands the options for homeowners.”
Family inspiration behind Noah
Hailing from India, Gupta first encountered the concept that eventually grew into Noah in the early 1980s, when his father was building the family’s home. He ran out of money before he could finish the house, so Gupta’s uncle stepped in, providing cash in return for a portion of the abode.
“They have been co-owners in the house,” Gupta said. “I often talk to my father and he says the biggest benefit of that transaction was, one, he didn’t have to take a loan, and, two, he didn’t have to worry about monthly payments.
“Whatever happens to the house, whether its value goes up or down, my father has somebody who is basically a partner to him. That is the fundamental ethos on which Noah is built.”
Noah, however, did not emerge until Gupta relocated in the U.S. in 2006, two years before the Great Recession, to work for investment firm BNY Mellon. Observing how the financial crisis and the subsequent economic recovery left homeowners strapped for cash but rich in home equity, Gupta founded Noah to solve that apparent liquidity problem. Conventional loans do little to address the later, Gupta says.
“They are all debt-based products,” he says. “Taking out a loan is not solving the problem. It is simply kicking the can down the road for that.”
Rise in popularity during the coronavirus pandemic
Since March, Noah has seen a 50% jump in new funding requests as well as a four-fold increase in interactions with current customers, many of whom have sought mortgage payment assistance. Through its Homeowner Protection Program, Noah can make mortgage or property tax payments on homeowners’ behalf for six months.
“Today, the coronavirus is shutting down entire industries and we are already seeing more homeowners turning to Noah for help,” Gupta says. “Noah is dedicated to being a long-term partner to homeowners by making our products more accessible during this time so we can put even more money in their pockets.”
Requiring an independent appraisal to assess the home’s value, Noah currently operates in 20 metro areas in California, Colorado, Utah, Oregon and Washington.