How LAToken Could Free Homeowners from Debt
Disclosure: I’m an adviser to LAToken.
I saw an article in the Washington Post the other day that read “Home equity lines of credit surge as banks approve loans to more and more owners.”
It made me very sad.
I saw a lot of people taking on interest payments and debt unnecessarily.
You see, once upon a time, the only way to get money out of your home (or any illiquid asset) was to take out a loan and pay interest on it.
But that’s not the case anymore.
Which is why I am very excited about the opportunity that LAToken.com (and others coming on the market now) represent.
It makes me sad that we aren’t yet in a world where people can tokenize the value of their homes as digital assets and simply sell a portion off for cash, with no interest rates.
Let’s say your home is worth $100k and you owe $40k. Let’s say you want to take out a $25k HELOC and need $20k now for whatever. You’re going to get charged a 7.49% rate on it….forever. That’s a lot of money going out the door.
But, if you tokenize your home and you sell 20% of it for $20k, you owe….nothing. Sure, you don’t have 20% of your house anymore, but you also don’t have to pay interest. If you want, you can buy the token back at a later date.
Yes, there are a number of things that need to be worked out on the legal and insurance side, but I am aching for the day where people (most of whom have the large majority of their wealth tied up in their homes) have a choice.
That future, where people are freed from the constraints of banks to leverage their own assets, is one to which I greatly look forward.
Last year in his post, The Golden Age of Protocols, Fred Wilson wrote:
I believe that business model innovation is more disruptive that technological innovation. Incumbents can adapt to and adopt new technological changes (web to mobile) way easier than they can adapt to and adopt new business models (selling software to free ad-supported software).
This is one of those business model innovations.
Yes, blockchain is a technology that banks can adapt to. But they are not equipped to offer democratized tokenization of assets.
In my mind, this type of token-centric ownerhip is inevitable and I think it’s something worth exploring.
Again, full disclosure: I’m an adviser to LAToken, but I wouldn’t do it if I didn’t like the idea. This is NOT investment advice.