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Is equity sharing a good idea?

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A shared equity mortgage, or partnership mortgage, can be a good way to purchase a home with little or no money down. In such an arrangement, the borrower/homebuyer has an absentee partner who, as the investor, provides all or some of the down payment.

Equity sharing is not as popular in a slowly appreciating real estate market as in a rapidly appreciating one when equity investors are easy to find. A type of equity sharing called tenants-in-common partnerships is becoming increasingly popular, especially in high-priced markets.

First-time buyers are usually most interested in a TIC arrangement because it gives them a way to buy property collectively with an unrelated partner.

Loan underwriting standards are more complicated with these types of deals because lenders have more than one party’s financial situation to assess.

It is a good idea to hire an attorney to help draft a shared equity agreement.

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