Home Equity Sharing

Home Equity Sharing is an attractive option for homebuyers who are planning on being an owner-occupant.

What is Equity Sharing

Equity Sharing (mortgage) helps homebuyers who do not have the full down payment of a home but can afford the carrying costs of homeownership e.g. mortgage payments, property taxes, home insurance, maintenance,etc……This is a specific type of real estate purchase agreement in which a shared-equity partnership of two or more parties buys a residence together. The borrower must occupy the property. When the property sells, the allocation of equity goes to each party according to their equity contribution. Each party also shares losses, if any, on the sale of the property.

How does a shared Equity Sharing Mortgage work?

Equity Sharing Mortgage is an attractive option for homebuyers who are planning on occupying the home. This shared mortgage grants them access to properties whose values might otherwise be beyond their means. A lender offers a down payment loan that doesn’t have to be repaid until the property is sold or decide to refinance. When the property is sold or refinance, the homeowner and the lender share in its price appreciation proportionally.

Advantages and Disadvantages of Equity Sharing Mortgage:

 There are many benefits to Equity Sharing Mortgages, especially for first-time homebuyers and those struggling to get into their first home.

  • Helps homebuyers with small or lower down payment to afford a house
  • Can covers down payment and the closing costs
  • May afford homes in a better location.
  • Can hedge against inflation.
  • Can help buyers build equity to use toward future home purchases
  • Homeowner sometimes gets less of the profits when the home is sold

Can limit homeowner as to what they can list the home for when they sell, or who they can sell it to