A shared appreciation mortgage loan is an increasingly popular consumer loan for homeowners. This relatively new product is offered by several lenders and has pros and cons associated with it that consumers should understand. It allows homeowners to tap into the home equity that has been built up in exchange for a minor ownership stake in the property. The lender then participates in the increase or decrease in the value of the property over time. There are no monthly mortgage payments but homeowners are still responsible for paying property taxes, insurance, and maintenance. The repayment of the loan is deferred until the homeowner sells the home or at the end of the duration of the loan terms.
To qualify for a shared appreciation loan you must own a home and have enough equity built up in your home. The loan is ideal for homeowners who want to tap into the equity built up. If a consumer qualifies a lender will give a portion of that built up equity (typically 5-20% of your home’s current value) in exchange of a stake of the future appreciation (or loss of value) in your home. These loans are ideal for homeowners who may not qualify for a HELOC or home equity loan due to credit or if they’re not yet 62 years old to do a reverse mortgage loan.
There are several considerations to make before deciding to proceed with a reverse mortgage loan. As with any large decision, it’s helpful to have an understanding of the pros and cons associated. Some of them include:
The process of getting a home equity alternative loan is fairly straightforward and typically entails the following steps:
Please note that not all lenders have the same process. Some may have more or fewer steps depending upon their process. Please inquire with the lender at the start of the discussion to outline their own process to properly set expectations.
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