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Indestata > Homes > What Is A Shared Appreciation Mortgage?
Homes

What Is A Shared Appreciation Mortgage?

TSP Staff By TSP Staff Last updated: July 9, 2025 7 Min Read
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Key takeaways

  • A shared appreciation mortgage is a type of home loan in which you exchange a portion (share) of your home’s appreciation for a lower interest rate, down payment or closing cost help or money to help repair the property.
  • This type of loan isn’t readily available. It might be an option if you’re buying your first home or need to modify your existing mortgage.
  • Rather than look for a shared appreciation loan, you can lower your interest rate in other ways, including with a higher credit score and down payment.

What is a shared appreciation mortgage?

A shared appreciation mortgage (SAM) is a type of home loan that grants a portion of the home’s appreciation to the mortgage lender in exchange for a below-market interest rate, help with the down payment or closing costs or funds to help make home repairs. You, as the borrower, benefit from a lower monthly payment or reduced upfront costs, and the lender receives a share of the proceeds when the home is sold.

While a SAM can help you afford a home, it’s not a widely available option, and risky. If your home’s value increases significantly, you might wind up owing the lender more in shared appreciation than what you owe on the mortgage. This type of loan is most often part of a first-time homebuyer program or loan modification. A modification permanently changes the terms of your loan so that the payments are more affordable.

How do shared appreciation mortgages work?

Shared appreciation mortgages can be structured in various ways, such as:

  • The lender’s share of appreciation remains in place for the life of the loan. That means that no matter when you sell, you’ll owe the lender that cut.
  • The lender’s share of appreciation expires after a set period of time, such as five years.
  • The lender’s share of appreciation phases out over time. In this scenario, the percentage you owe the lender decreases periodically until it’s completely phased out.

Example of a shared appreciation mortgage

Say you bought a home for $330,000 with a shared appreciation loan that gives the lender a 20 percent share. A decade later, you sell the home for $485,000. At that point, you’d owe your lender $31,000, or its appreciation share

Pros and cons of a shared appreciation mortgage

Pros

  • Lower interest rate: This means lower monthly payments and less interest paid overall.
  • Could get you into a home sooner: Some SAMs provide homebuyers help with the down payment or closing costs. This could get you out of renting and into a home faster.
  • Could help keep you in your home: If you’re getting a SAM as part of a loan modification or other relief program, you might be able to avoid foreclosure.

Cons

  • Not widely available: Most lenders don’t offer this type of mortgage.
  • Lose out on some proceeds when you sell: A home is a significant asset. With a SAM, you’ll give some of that asset back to the lender. This could prevent you from selling your home or refinancing.
  • Can be complicated: The arrangement might include phase-out clauses or varying shared appreciation percentages.

Alternatives to a shared appreciation mortgage

It’s tough to find a shared appreciation mortgage, and there are better ways to obtain a lower interest rate. You might try:

What to know about shared appreciation mortgages today

A shared appreciation mortgage is a unique home financing arrangement, and most mortgage lenders don’t offer it as an option to buy a home. More often, a SAM comes into play when a borrower struggling to pay their mortgage seeks a modification.

That said, you might find the rare lender offering a shared appreciation loan in these cases:

  • You’re exploring affordable homebuying programs that include shared appreciation.
  • You plan to stay in the home past the phase-out point of the shared appreciation clause.
  • You’re flipping houses or otherwise investing in real estate and need a lower rate.

FAQ

  • In a shared equity or home equity sharing agreement, a company or lender provides a homeowner with a lump sum in exchange for an ownership share, or a share of future appreciation. You won’t repay the money until you sell or at the end of the agreement’s term.
  • Most mortgage lenders do not offer shared appreciation mortgages. Some companies, such as Hometap, Unison and Unlock, provide shared equity agreements, which are slightly different in that you use them to access your home’s equity, not buy a home.

  • It depends on the terms of the loan, but generally, you can get rid of a shared appreciation mortgage by fully repaying what you borrowed plus the lender’s share of appreciation. Keep in mind: That might not be possible unless you sell your home and apply those proceeds to the repayment.

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