Core Concepts: Understanding the Home Equity Agreement
Mongolia's first Home Equity Agreement (HEA) — is not a traditional loan, but a solution aimed at solving the real challenges faced by Mongolian households and opening up new opportunities by leveraging the value of your apartment.
A partnership in the value of your apartment
A Home Equity Agreement is a financial partnership between you (the homeowner or buyer) and Hestia. Simply put, Hestia provides you with a specific amount of cash today. In return, you agree to share a certain percentage of your home's future value with Hestia. You can think of Hestia as a silent partner investing in the future appreciation of your home.
- You can get the money you need to buy an apartment or finance other needs in cash immediately.
- You retain full ownership rights to your apartment and continue to live in it as before.
- The agreement is determined by the value of your apartment, not by a loan amount.
No debt, no monthly payments. This is a shared investment.
The most important concept is that a Home Equity Agreement is not a loan. Because of this fundamental difference, its impact on your financial situation is also more positive.
| Feature | Hestia Home Equity Agreement | Commercial Bank Loan |
|---|---|---|
| Your Obligation | You give a share of your own apartment. | You create a new debt and must repay a fixed amount. |
| Monthly Payments | None | Yes |
| Interest Payments | None | Yes |
| Repayment Basis | Based on the market value of your apartment at the end of the contract. | Based on the borrowed amount plus interest. |
We succeed together, and we share the risk together.
In this partnership, our success is directly dependent on the value of your apartment. If the value of your apartment increases, we will share in the appreciation together. If the value decreases, Hestia will share the loss with you. This risk-sharing condition is the main feature that distinguishes us from a loan. Furthermore, to ensure fairness, the contract also includes a "Hestia Cap" designed to protect you from excessive costs in case of a sharp market increase.
- Sharing Appreciation: When the value of your apartment increases, Hestia will receive a share of that growth according to our agreed-upon percentage.
- Risk Protection: If the value of your apartment decreases, Hestia will bear the loss, so you will not bear the risk of a market downturn.
- Appreciation Cap: Even if the market rises sharply, there is a cap on our profit to protect you from excessive costs.
- Sharing Market Risk: With a loan, you bear all the market risk alone, whereas we share the rewards and risks of homeownership.
- No Interest Accumulation: Your obligation will not increase over time and will only be determined by the actual value of the apartment.
You decide when to end the agreement.
Our agreement has a specific term of 5-7 years, and you can end it at any time without any penalties.
- Selling the Apartment: The most common way to end the agreement.
- Buying Out Hestia's Share: Buying our share with your own savings or other financial sources.
- Refinancing: Taking out a new mortgage to end the agreement.
- Expiration of the Contract Term: Settlement at the end of the contract term.