shared appreciation mortgage


The appreciation mortgage shared or shared appreciation mortgage (you can put the words whatever way you like) was first introduced in the early 1980s. At this time, healing interest rates were extremely high and this made qualifying for a mortgage quite difficult. The idea behind this financial product was to allow borrowers to give a lower interest rate at the time of commencement (as much as 2%). In exchange, view the mortgage company would then have a share in the properties increased value in the future.

Basically, look the trade-off was that the lower interest-rate in the short-term would allow people to buy homes and the mortgage lender would make up the difference in their profit by sharing in the increased value of that house in the future.

At the time, the concept never really caught on. Interest only mortgage products became the standard in this area because not alone that they offer a lower starting rate but they also offer the potential for a lower rate on an ongoing basis as well and this particular aspect of them made them more attractive than the fixed rate. After only a short time in the marketplace the shared appreciation mortgage idea was put to one side. Over time, a lot of the benefits of the traditional interest only mortgage have been eroded and the mortgage industry is bound to look at some of the more inventive solutions again.

As you will have heard said many times before, the market is cyclical and recently there has been a lot of uncertainty about rising interest rates. Therefore, the shared appreciation mortgage has not made a comeback just yet but in a difficult market, mortgage lenders will always do everything they can to still allow people to continue to buy homes so one would have to wonder how long it is before this particular mortgage product starts to show its face in the market once more.