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What is a shared appreciation mortgage?

Kacie Goff Suzanne De Vita Kenneth Chavis IV
Written by
Kacie Goff,
Edited by
Suzanne De Vita,
Reviewed by
Kenneth Chavis IV,
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Published on February 12, 2025 | 3 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.

A shared appreciation mortgage is a unique home financing arrangement. It isn’t a common option today, although some variations of it still exist in certain homebuyer programs and loan modification situations. Here’s what to know.

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, down payment or closing cost help 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 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.

How do shared appreciation mortgages work?

Shared appreciation mortgages can be structured in various ways. These include:

  • 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.

When to use a shared appreciation mortgage

Most mortgage lenders don’t offer shared appreciation mortgages to buy a home. More often, a SAM comes into play when a borrower struggling to pay their mortgage seeks a loan modification. A modification permanently changes the terms of your loan so that the payments are more affordable.

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.

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:

FAQ

Written by
Kacie Goff Arrow Right Icon
Personal Finance Contributor
Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance.