| The equity sharing approach to buying a home has | | | | a particular period of time, say three, five, or ten |
| been around for a long time. But recently it has | | | | years. But there are many options available depending |
| become more popular due to rising mortgage rates | | | | on the equity partner. |
| and increasing real estate prices. Simply put, home | | | | The most popular form of home equity sharing is |
| equity sharing makes it possible for you to buy more | | | | with family members or close friends. This is because |
| home than you can afford today, by sharing the | | | | these people know you already and are probably |
| purchase of a home with an equity partner. | | | | more likely to be willing to be a partner in helping you |
| Typically, when you buy a home, you put some | | | | buy a home than a stranger. The downside is that |
| money down. The rest of the payment for the | | | | working with strangers may result in more of a |
| home is provided by a bank, from which you take | | | | formal business relationship, which could be better for |
| out a mortgage. With equity sharing, part of the | | | | you in the long-run. The down-side is that it is harder |
| down payment is provided by an equity partner. | | | | to find strangers who will want to partner with you |
| Much like venture investors buy part of a startup in | | | | to help you buy your home. However, there are now |
| exchange for equity in that startup, equity partners | | | | services on the Internet as well as commercial banks |
| buy part of your home in exchange for a piece of | | | | that will partner with you or help you find partners |
| the equity. That means that if the value of your | | | | for an equity sharing arrangement. |
| home increases, and you sell, the equity party takes | | | | Make sure you read the fine print whenever you |
| part of the upside (relative to the amount of equity | | | | enter into an agreement. Understand your obligations |
| they own). | | | | as well as those of the equity partner to find out if a |
| The devil is in the details of course. Depending on the | | | | home equity partnership arrangement is right for you. |
| arrangement, you may have to refinance or sell after | | | | |