In case you haven’t heard, there’s a crisis in the mortgage market. Probably by now, you’ve heard about the sub-prime lender implosion, but now, it’s no longer sub-prime lending that’s suffering. Now, prime mortgage lenders are also taking a big hit. Money is getting more expensive – even this week’s Economist magazine has a cover story about the credit squeeze.
So what’s a prospective home buyer to do? Well, the good news is, if you’ve got some cash for a nice-sized down payment, things aren’t too bad for you at the moment. But what if, like most people, you don’t have 10% of $700,000 lying around? In a situation like this, you may want to look into doing some equity sharing.
Equity sharing is where someone other person comes in and provides the down payment, and in exchange, they go on title to the property. There will be a separate contract between the everyone who goes on title as to what the plan will be. For example, in three years, the plan might be that the buyers re-finance the property, and buy out the equity share (plus accumulated equity, of course!). Or, the plan might be to sell the property, and the buyers, using the equity they have then built up, can use that as a down payment on another property.
Does this sound interesting to you? If so, the next question might be: where do you go and find an equity partner? Or what if you have some money, and are interested in becoming an equity partner? Thanks heaven for the Internet! It turns out, there are web sites that put buyers and equity partners together. Check these out:
I have never used either of these web sites, so I don’t personally endorse their services – but if you think an equity share arrangement might be useful for you, you might want to check them out!