Shared Equity?

With local home prices soaring, how do first time buyers even get a foot in the door? One possible solution is a shared equity purchase. Under this scenario, 2 (or more) parties pool their resources to buy a home together. These partners can be parents and children (the most common), grandparents and grandchildren, cousins and even completely unrelated parties. An aside here, when unrelated parties make a purchase together the number of lenders that will loan under these circumstances is limited.

Shared equity purchases generally involve a downpayment from one partner and the monthly payments from the other partner. However, each individual transaction can be tailored to fit the circumstances.

Our office has been involved with several of these purchases over the years and, I [WINDOWS-1252?]can’t stress this enough: the biggest tripping point is a NO WRITTEN agreement detailing any foreseen issue. People forget that they are entering into business with someone. That other person maybe their parent, cousin, or stranger but it is still a business partnership. For that reason the agreement must be in writing and, at the minimum, reviewed by an unbiased attorney familiar with this type of partnership.

These shared equity agreements will contain agreements on downpayment requirements, mortgage payments (and the possibility of a missed payment), tax related interest deductions, etc. Additionally there will be provisions for the sale or buyout of the property and how any appreciation and profits will be divided.

For other ideas on how to purchase your first home, or any mortgage needs, give me a call.

Fixed rates for conforming mortgages (under $359,650) as of 5/20/05,a.m. are:
(Rates quoted are for 0 point loans)

30 year fixed: 5.5% (APR 5.58%) payments are $2,042.05/mo.
15 year fixed: 5.25% (APR 5.39%) payments are $2,891.15/mo.