Define: Shared Equity Mortgage

A shared equity mortgage is a type of mortgage where the lender provides a portion of the down payment or purchase price of a property in exchange for a share of the property’s future appreciation.

In a shared equity mortgage, the lender typically contributes a percentage of the property’s value, usually between 5% and 20%. When the property is sold or the mortgage term ends, the lender receives their initial investment plus a share of the property’s appreciation.

Shared equity mortgages can help homebuyers afford a higher-priced property, as the lender’s contribution reduces the amount of the traditional mortgage required. Additionally, the homebuyer may benefit from the lender’s share of the property’s appreciation.

One potential downside is that the homebuyer will have to share the property’s appreciation with the lender, which could reduce their overall profit when selling the property. Additionally, the terms and conditions of the shared equity mortgage should be carefully reviewed, as they may include restrictions or requirements.

Shared equity mortgages are typically available for residential properties, including single-family homes, townhouses, and condominiums. However, the availability and terms may vary depending on the lender and the specific property.

Yes, in most cases, shared equity mortgages can be paid off early. However, it is important to review the terms of the mortgage agreement, as there may be penalties or restrictions associated with early repayment.

Refinancing a property with a shared equity mortgage may be possible, but it will depend on the lender’s policies and the terms of the mortgage agreement. It is advisable to consult with the lender or a legal professional to understand the options available.

If a borrower defaults on a shared equity mortgage, the lender may have the right to take legal action to recover their investment. This could include foreclosure proceedings or other remedies outlined in the mortgage agreement.

Yes, you can sell a property with a shared equity mortgage. However, the lender will typically have a claim on a portion of the property’s appreciation, which will be paid to them upon the sale.

The regulations surrounding shared equity mortgages may vary depending on the jurisdiction. It is important to consult with a legal professional or review the applicable laws and regulations in your area to ensure compliance.