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What is Shared Appreciation?

Shared appreciation is a concept that benefits both the lender and the borrower. The idea started in the early 80's because mortgage rates were at an all time high. Shared appreciation provides borrowers with an average of a 2% discount on loans. In turn, the lender gets to benefit off of the future value of the home.

The Specifics of a Shared Appreciation Mortgage (SAM)

Shared appreciation runs similar to a fixed mortgage rate. The interest rate is cut down and then a portion of the appreciation value is then given to the lender. This means the more that your house appreciates the more that you owe to your lender for letting them borrow you money at a lower rate. It can be a gamble for the lender, but they have the opportunity to make money off your house without you owing them anymore money. Since the appreciation serves as profit for you, it's not like you have to reach into your pocket and give them money at the end of your loan. It is virtually just taken out of the appreciated value, which you never see.

Benefits of a SAM

  1. You have the option to deter some of the payments
  2. You can select what part of the loan you want the Shared Appreciation to cover.
  3. Lower interest rates then the other mortgages (2 or 3 points lower)
  4. This is an opportunity for first time buyers to own their own house. This is because the entire amount does not need to be paid at one certain time.
  5. It also helps to increase your overall buying capacity. This is especially nice in the very beginning as well.

Shared Appreciation is a Great Way To Go!

As you can see, there are some great benefits to a Shared Appreciation Mortgage. But like always, you need to choose what is the best for you. You do not want to jump into a SAM with a property that can become depreciated over time. You always want to make the situation fit so that you see great benefits. If you play your cards correctly, then that can be with a Shared Appreciation Mortgage. It can be a bit of a gamble. But if you enjoy those kinds of things, then by all means, go for it!

National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 7, 2012