Shared Appreciation Loan

[Eric Lowe]

Hello, I am evaluating the pros and cons of a shared appreciation mortgage (SAM). The context: I want to finance the construction of a 2-unit ADU in San Diego. I have an existing 1st position DOT on this property, so the SAM would be a 2nd. I have no intention of selling the property, so a SAM with a phase-out provision on the amount of appreciation shared seems like a good way to reduce the cost of borrowing and to hang on to more of my own cash reserves during construction.

Question: what experience does anyone have taking on this sort of loan? And what tips do you have for someone seeking out this loan product?

Thanks in advance,

Eric

[Kenny Simpson]

Quote from @Eric Lowe:

Hello, I am evaluating the pros and cons of a shared appreciation mortgage (SAM). The context: I want to finance the construction of a 2-unit ADU in San Diego. I have an existing 1st position DOT on this property, so the SAM would be a 2nd. I have no intention of selling the property, so a SAM with a phase-out provision on the amount of appreciation shared seems like a good way to reduce the cost of borrowing and to hang on to more of my own cash reserves during construction.

Question: what experience does anyone have taking on this sort of loan? And what tips do you have for someone seeking out this loan product?

Thanks in advance,

Eric

 @Eric Lowe you are just looking for a second mortgage?  You want get a loan that you pay off the line holder with appreciation in the future?  Is your first Locked in on a low rate?  why not just get a second loan without all of that?

[Eric Lowe]

Yes, the SAM would become a 2nd position mortgage. I've identified a SAM, in particular, because it could potentially fetch a better rate than a tradition 2nd position loan, and with other terms that are more favorable for a borrower because of the share appreciation benefit for the lender upon a liquidity event, like a refinance or a sale. The 1st position loan on this property is still within a seasoning period, and is not set at a low rate.

[Caroline Gerardo]

They will control what improvements and decisions you make regarding the subject. CALHFA has one. I don't think Unison will give you any more than 70% total combined loan to value. A HELOC would give you more money if you can qualify full documentation.

[Eric Lowe]

Thank you, Caroline.