ABSTRACT
Property price appreciation expectations are an integral part of the underwriting of the shared appreciation mortgage (SAM). The lender’s estimate of a home’s rate of appreciation is an important factor in establishing the SAM’s contract interest rate. The purchaser in the secondary market expects a competitive yield on the loan, but the yield from a SAM is partially based on the validity of the original lender’s expectation of the appreciation of the property securing the loan. The large monthly payments required to amortize fixed rate mortgages at high interest rates have priced many potential homebuyers out of the market. The mortgages would carry a low face interest rate, but they would contain equity participation by the lender. The shared equity purchase programs that are presently being offered take many forms. One important form calls for a joint venture between the homebuyer and an investor.
