Equity Sharing or Equity Appreciation Bridge Loan Programs

Bridge loans using equity are innovative financial tools that allow homeowners to leverage the equity in their current property to purchase a new home before selling their existing one. These loans bridge the gap between the purchase of a new home and the sale of the current home, providing homeowners with the necessary funds to secure their next property without the pressure of immediate sale.

Bridge Mortgage Loan Information

Types of Bridge Loans

1. Equity Share Agreements

Equity share agreements involve the homeowner receiving funds in exchange for a share of the future appreciation of their home. This type of bridge loan does not require monthly mortgage payments; instead, the lender shares in the profit when the property is eventually sold. The key features of equity share agreements include:

• No Monthly Payments: Homeowners do not make monthly payments; instead, the lender receives a portion of the future appreciation.
• Access to Home Equity: Homeowners can access a significant portion of their home’s value upfront.
• Shared Appreciation: The lender shares in the appreciation of the home’s value when it is sold.

While bridge loans using equity can provide substantial benefits, it is essential to consider the terms and conditions, including:

• Cost of Borrowing: Understanding the total cost, including fixed interest rates and shared appreciation, is crucial.
• Market Conditions: These loans are tied to the future appreciation of the property, which can be influenced by market fluctuations.
• Repayment Obligations: Homeowners should be aware of the repayment terms and ensure they align with their financial situation and future plans.

Benefits of Bridge Loans Using Equity

• Eliminate Home Sale Contingencies: Homeowners can purchase their next property without the contingency of selling their current home first.
• Unlock Home Equity: Provides immediate access to the equity in the current home, which can be used for the down payment on a new property.
• Flexible Repayment Terms: Offers flexibility with deferred payments until the loan matures or the home is sold.
• Increased Purchasing Power: Enables homeowners to act quickly in competitive real estate markets, securing their desired property without delay.

2. Equity Appreciation Agreements

Equity appreciation agreements, similar to equity share agreements, allow homeowners to receive funds based on the future appreciation of their home. However, in this model, the amount owed by the homeowner is tied to the increase in the home’s value, calculated using a home price index. Key aspects include:

• Fixed Interest Rates: Typically, these loans come with a below-market fixed interest rate, with interest deferred until the loan matures.
• Shared Appreciation: The amount owed at the end of the term includes the principal, accrued interest, and a portion of the home’s appreciated value.
• Capped Costs: There are safeguards in place to ensure that the combined cost of interest and appreciation share does not exceed a certain limit, protecting homeowners in rapidly appreciating markets.

Bridge loans using equity, through equity share or equity appreciation agreements, offer a flexible and innovative solution for homeowners looking to transition between properties seamlessly. By leveraging the equity in their current home, homeowners can eliminate contingencies, access necessary funds, and increase their purchasing power, all while deferring payments until their loan matures or their home is sold. As with any financial product, understanding the terms and considering the potential risks and benefits is crucial to making an informed decision.

For borrowers who do not qualify for Conventional financing for any reason, at The Mortgage Calculator we have over 5,000 additional Non-QM Loan Programs using alternative documentation! Options for alternative documents include bank statement mortgage programs, 1099 mortgage programs, asset based mortgage programs or P&L mortgage programs.