Making the Dream (Move) Work : Shared Equity Loans - Good, Bad, Ugly?

Post date: 2021-04-20 10:57:03

HomeTap! It's all over NPR! We want to buy in our dream location and need options for our down payment. Tell me about your experiences or knowledge with 'shared equity loans'. They seem like a new loan product and we're considering applying to some of the various companies that offer them instead of going with a traditional home equity loan because of the lack of payments needed to service the debt, among other things. What's the deal with this style of financing?

My partner and I recently moved to our dream location in California because we miraculously found good jobs here. The housing market is insane and much more (x5) expensive than where we were previously. Think Bay Area compared to Merced, except more disparate. Initially the timing wasn't great because we were refinancing the house we bought in 2017 when we found jobs and began getting our affairs in order to move. Fortunately we made the move and job change happen and are currently renting in our new community. We also found renters for our former residence so we wouldn't loose out on the cost of the refinance by selling immediately after it. The 'shared equity loan' would be against the rental property. The house is in a very popular and up-and-coming market. We purchased quite low in the market and are pleased to have the investment pay off.

I've read around a bit and while it appears these agreements take various forms I'm wondering if there are any general rules to follow...Like should I go with a company that takes a cut of the total value at sale or just the appreciation? If we never sell the property, what happens? Is there a term expiration date?

I've done some googling and cannot, for the life of me, find an example of an 'equity sharing agreement' that I can get for free. Part of my ask is for help in finding one so I can check the provisions and at least have some slight familiarity with the structure. Also, what are the history of these agreements? Have they always been around? Are they regulated?

Any other input anybody has would be much appreciated, thanks!

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