As of 2022, Americans have accumulated more than $20 Trillion in home equity according to the Federal Reserve. However, many homeowners are reluctant to tap into their housing wealth due to the current high-interest market conditions. That is why non-traditional home financing options are beginning to gain popularity. One of these options is a shared appreciation mortgage (SAM).

A SAM is a loan that allows a borrower to share a percentage of the appreciation in their home’s value with a lender. In exchange for a lump sum of loan proceeds to the borrower, the lender will charge an interest rate that is typically below market, plus an additional cost that is contingent on the home’s appreciation. For most SAMs, borrowers are not required to make additional monthly mortgage payments; instead, the loan is repaid in full when it matures. The maturity event can occur when it reaches term or when the borrower refinances or sells the home.

A shared appreciation mortgage can help mitigate the pressure of additional monthly mortgage payments while still allowing the borrower access to immediate funds, at a below-market rate.

What are the key benefits of a shared appreciation mortgage?

  • Immediate access to cash upfront
  • Lower than prevailing market interest rate
  • No additional monthly payments
  • Increased cash flow, time value of money
  • Keep your low interest, primary mortgage intact

What are some disadvantages of a shared appreciation mortgage?

  • Must have equity already in home (25-50% minimum for most options)
  • Reduces potential profit margin when you choose to sell the home
  • Owner occupancy is required, cannot be used for investment properties
  • Assets or income qualifications

There are many options when it comes to home financing and understanding how a SAM compares to more traditional products is a great way to evaluate alternatives:

How do I decide if a Shared Appreciation Mortgage is right for me?
Finding suitable financing options to tap into your home equity can be overwhelming; and, deciding if a shared appreciation mortgage is the right solution will depend on your unique circumstances. If you’re interested in calculating how much you may qualify for or would like to speak with a licensed loan officer about your options, call us at 1-877-676-3934. We have licensed loan originators that can help you get the most out of your equity.