Buying a house instead of renting is slowly becoming the wiser option in today's market. However, your current savings may not be enough to purchase your dream home. Don't worry, there's still hope for you to get your dream home even without enough savings and it's called shared equity mortgage.
Shared Equity Mortgage is defined by Investopedia as "joint ownership of real estate by both lenders and property dwellers. When the property is eventually sold, the owners share in the proceeds, or equity."
While this definition can confuse some, the outlet provided further explanation regarding the concept of equity sharing. According to the outlet, shared equity presents a win-win situation for both the lender and the homeowner because the former can get a home at a lower interest rate while the latter will get the house they have always wanted.
Shared equity is most commonly used among families whose parents are looking to help their children get their dream house or whose children are looking into providing their parents with a retirement home, Realty Times reported.
However, equity sharing may also be used by people who are willing to help a friend in need or those who would like to invest in a specific property.
While equity sharing sounds like an attractive proposal, the publication noted that there are a couple of legal aspects that you need to look into before participating in one.
According to the outlet, the agreement between the lender and the occupants should be in writing. Whether your kids are your occupants or they are the lender, it is also best to keep such kinds of agreements signed in writing.
Aside from this, there is a requirement that one of the owners of the property must live in the said residence. It is also important to determine the fair market value price from your real estate agent and keep his or statement in writing in order to keep yourself protected in case your documents are put into question.
