When they sell, Unison will collect its original $33,500 plus 35 percent of the difference between the sales price of their home and its purchase price of $335,000. It lies on a quiet court and close to schools and shopping. They bought a three bedroom, three bathroom single story home with 1,350 square feet. This would have cost about $250 more per month. Had the couple taken out a larger mortgage, their payment would have included mortgage insurance. Their combined principal and interest monthly payment is $1,358. They borrowed the remaining 80 percent from a traditional lender.ĭoes a low down payment make your offer weaker? They bought a $335,000 home in Vallejo, with 20% down. Krill and Rose partnered with Unison to finally purchase their first home after their landlord sold the home they had rented for 14 years. Who has successfully used a shared equity mortgage? Unison’s funding comes from institutional investors, including pension funds and university endowments, says Mia Dougherty, an account coordinator at Unison. In exchange, it collects a 35 percent share of any increase in value when the house sells. Unison Home Ownership Investors, the private company Ross and Krill received their help from, provides half of the buyer’s down payment funds. The appraised value or purchase price of the home cannot exceed $245,000.Īlternatives when you don't have 20% down The buyer agrees to pay part of the property appreciation to the city. What’s the down payment for a shared equity mortgage?ĭepending on the area and the program selected, the options for programs and what they offer remain very different.įor instance, the City of Austin, Texas, offers a shared equity option with down payment assistance up to $40,000. If median-priced homes in New York City cost $600,000, a 20 percent down payment is $120,000. In high-income areas, homebuyers use shared equity mortgages to affordably finance their down payments. How do lenders know if you borrow your down payment? Affordable Homeownership: An Evaluation of Shared Equity Programs, a study by the Urban Institute, found that the incomes of participants averaged 51 percent of their area’s median income. Some shared equity mortgages allow low-income and moderate-income families to purchase homes at below-market prices. In high-cost markets like San Francisco, private investors may help buyers finance more expensive homes. Most come from local governments, non-profit or universities. Who offers shared equity mortgages?ĭPR currently tracks 33 shared equity programs. He remarks that because this home financing model trades some of a homeowner’s value in the house, buyers should carefully evaluate all their down payment program options. “Municipal shared equity programs have been around for a long time, and today, we are seeing more private investors enter the market,” says Rob Chrane, CEO of the DPR. The deal may or may not include repayment of the original amount borrowed, says Atlanta-based Down Payment Resource, (DPR), the nationwide database for homebuyer programs. But instead of monthly payments from the borrower, the lender gets part of the equity gained when the borrower sells the home. With a shared equity mortgage, a lender provides part of the down payment. For them, a new-but-old product, the shared equity mortgage, may save the day. Many buyers like this couple find it tough or almost impossible to accumulate a big enough down payment to get the house they want. What is a shared equity mortgage, anyway? “It made sense for us based on the fact that the payments are $250 less each month than originally planned,” the Vallejo, California couple claims. Septem5 min read Shared equity mortgage is not “too good to be true”įor some buyers challenged by the task of saving a big fat down payment, the shared equity home loan is a big fat blessing.ĭaniel Krill and Shannon Ross believe it would have taken them three more years to save a 20 percent down payment without using a shared equity mortgage.
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