The 4 Best Shared Appreciation Mortgage Companies of 2020

Turn your home equity into cash without taking out a loan

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A shared appreciation mortgage allows homeowners to use the home equity they have built up in exchange for giving an investor a small ownership stake in the property. The shared appreciation mortgage (SAM) company is an investor, not a lender. As part-owner, the investor shares in the increase or decrease in the value of the property over time. The homeowner continues to pay property taxes, insurance, and maintenance, but not loan payments, on the sum the shared appreciation company has invested. The homeowner repays the loan when they sell the home or at the end of the duration of the loan terms.

Shared appreciation mortgages are not for every homeowner, however. The offer is typically between 5% to 20% of your home’s current value, so you need more equity than that to qualify. There are also origination fees in the 2.5% to 3% range to contend with. Finally, the loan will need to be paid back with appreciation within 10 years in most cases. This is not a financial tool for the faint of heart.

We researched nine mortgage companies to find the four that provide shared appreciation mortgages. After looking at their costs, qualification criteria, terms, and speed, we let you know how each one performs best.

Warning

Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau (CFPB) and/or with the U.S. Department of Housing and Urban Development (HUD).

The 4 Best Shared Appreciation Mortgage Companies of 2020

  • Best Overall: Unison
  • Best for Long Terms: Point
  • Best for Fair Credit: Hometap
  • Best for Easy Qualification: Noah

Best Overall: Unison

Unison

 Unison

Unison offers a 30-year term length, access to up to $500,000 in cash, and a 60-second pre-qualification with no impact on your credit score, making Unison our best overall shared appreciation mortgage company.

Pros
  • Maximum term of 30 years

  • No added debt, monthly payments, or interest

  • Option to buy out Unison’s claim

  • Homeowners can convert up to 17.5% of the home’s value to cash if there’s enough equity built

  • No minimum income or age requirement

Cons
  • If the property appreciates, homeowners pay more to Unison

  • After 30 years, homeowners are responsible for buying out Unison

  • If the home is not properly maintained, the amount you owe to Unison could increase

  • 3.9% servicing fee

Unison is best overall because it offers the longest term available at 30 years, one of the highest cash payouts if your equity qualifies, and a quick and easy processes for eligibility and funding.

At the beginning of the transaction, Unison charges the homeowner a 3.9% origination fee. During the contract term, the homeowner makes no payments on the cash they are given. No added debt shows up on your credit report, and there’s no interest accumulating against you. You can use that cash for whatever you want. The term ends at 30 years, sooner if the homeowner sells the home before then. At that point, the homeowner must pay off the cash that Unison invested. If there’s a home sale, the homeowner must share the profit with Unison.

Prior to partnering with homeowners, Unison evaluates the credit, income, and the property, without any impact on the homeowner’s credit report. Usually, the home needs to be the primary residence. Single-family detached homes, condos, and townhouses are eligible. Unison can claim up to 20% of the increase in the home’s value when it is sold or at the end of the term.

Unison can pre-approve someone’s eligibility within a minute. It may take up to 30 days to get through the entire process and get funded, however. Scheduling the appraisal is most often the reason for the process length.

Founded in 2004, Unison is based in the San Francisco, California, area. They have made over $300 million dollars in residential real estate investments and are funded mainly through institutional investments like university endowments and pension funds. Funding from Unison is currently available in 29 states and the District of Columbia. They work with many mortgage lenders across the U.S. so there are lots of institutions that can attest to their professionalism.

Best for Long Terms: Point

Point

 Point

While other home appreciation investors have a maximum 10-year term, Point gives you 30 years to decide when it best fits your schedule to pay back the company. And since Point invests up to $350,000 and doesn’t care about your credit score or debt-to-income ratio, we rate it best for long terms.

Pros
  • No monthly payments

  • Investment amounts available up to $350,000

  • Credit score and debt-to-income ratio don’t matter

  • Homeowners retain control

  • Point doesn’t get added to the title of your property

Cons
  • Could end up paying more if home goes up a lot in value over 30 years

  • Point uses a risk-adjusted home value of up to 20% less than what your home appraises for

  • No access to ongoing cash because Point gives you a one-time lump sum payment when investing in the equity in the home

  • Available in 17 states plus Washington, D.C.

  • There is a "penalty" imposed at the end of your term if you choose to rent the property

As one of only two shared appreciation companies that offer terms up to 30 years, Point earned best for long terms. It also has a very simple quote process online, with up to $350,000 in funds available for your home.

At the beginning of the term, there is a 3% to 5% processing fee, as well as fees for the home appraisal and escrow, which Point estimates will cost $550 and $500 respectively, although these amounts could vary based on the size and location of the home.

Point lets homeowners access $35,000 to $350,000 of home equity. After the origination and other fees are taken out, Point has no costs during the term. It's not a loan, so there are no monthly payments. There is no interest charged, either. Instead, Point becomes a partner with you in the future change in value of your property. If the home's value rises, they share the gains when you sell or refinance. If the home's value drops, Point shares in the loss. At the end of the term, you’ll need to pay back the original investment plus between 15% to 30% of your home’s appreciation.

To qualify, the home must be well-maintained and located in an area where the home is likely to appreciate in value. Homeowners should have a strong credit history or evidence that their credit is improving. They must also have enough equity in their home to cover the transaction. Point typically wants homeowners to retain at least 20% to 30% of the equity in their home after Point makes its investment. Point will review the homeowner’s credit history, income, home value with equity, and the intended repayment plan.

The maximum loan-to-value ratio is usually around 80%, although some borrowers need to have more equity to qualify based on their full financial picture. Homeowners must buy back Point’s share of their equity—or sell their house—within 30 years of the time they borrow.

Point has built a trustworthy reputation. The Center for Financial Services Innovation, America’s leading non-profit focused on consumer financial health, recognized Point with the prestigious 2017 FinLab award.

Best for Fair Credit: Hometap

Hometap

 Hometap

If you have a fair credit score of at least 600, Hometap is your best choice. Not only is it able to work with your credit score in that range, but also permits you to have a high loan-to-value (LTV) ratio of 75%, while funding up to $400,000.

Pros
  • No payments to be made until you sell your home or settle the investment term

  • Single family homes and condos can qualify

  • Allows for a loan-to-value ratio of up to 75%

  • Funds up to $400,000

Cons
  • Loan term maximum is 10 years

  • Will not invest in vacation homes

  • Currently investing in homes in only 12 states

Your credit score of 600 may still qualify you for a generous deal with Hometap. If you also have a high LTV, you can still qualify for up to $400,000 in funds if you have the equity, making Hometap our choice as best for homeowners with fair credit scores.

You’ll receive your investment amount four days after you sign the investment agreement with Hometap. The closing costs are deducted from the total, so you’ll have no out-of-pocket costs other than the appraisal fee. The origination fee will be 3% of the investment amount, along with escrow, attorney, and document recording. 

During the term, there will be no fees or payments until the end of the term at 10 years, or if you sell your home before then. You can also stay in your home and settle the investment early by paying off Hometap before the end of the 10-year term with your savings, a home equity loan or line of credit, or a mortgage refinance. During the term, you must still maintain the home and make timely mortgage, insurance, and property tax payments. There are no pre-payment penalties.

Hometap allows homeowners to access up to 30% of the property's value without taking on debt. However, it cannot be used toward the down payment of the property that secures it. Unlike most shared equity investors, Hometap Equity Partners does not take a percentage of a home's appreciation. Instead, Hometap earns 13.9% to 16.7% of the home value at settlement. A dedicated investment manager for homeowners will walk you through the process.

To qualify, you’ll want to have a credit score of at least 600, a minimum of 25% equity in your single-family home or condo, and the investment amount you ask for must be less than 30% of your total home value with a maximum of $400,000.

You can get pre-qualified with their 10-minute online application, and funding typically happens in three weeks.

Hometap lends in 12 states currently, but is expanding throughout the country.

Founded in 2017 and headquartered in Boston, Massachusetts, Hometap is a fast-growing company led by a CEO that has built five companies in addition to a solid career at Bain Capital. Other investors trust Hometap’s reliability too. In December 2019, Hometap secured $100 million in investment funds to expand into more states.

Best for Easy Qualification: Noah

Noah

 Noah

No shared appreciation mortgage company makes it easier to qualify than Noah. Homeowners can prequalify online in under a minute, the minimum required credit score is only 625, the homeowner’s debt-to-income ratio can be as high as 60%, and the homeowner can have up to three existing liens on the property, including mortgages and HELOCs. Plus, funding happens in 15 days, the fastest in the market.

Pros
  • Noah’s Homeowner Protection Program provides qualifying customers access to an additional $10K in funds

  • No restriction on the use of funds

  • No monthly payments—contract terms are flexible up to 10 years depending on your individual contractual agreement

  • Terms are not tied to current interest rates or broader macroeconomic policy

  • Financing does not appear on the homeowner’s credit report and does NOT affect your credit score

Cons
  • Does not enter into equity partnerships with homeowners whose property is valued less than $300,000

  • Total cost-of-capital for funding will be significantly higher than conventional loans

  • Transaction will result as a lien on your property unlike an unsecured personal loan

  • At the end of the contract term, homeowners will be responsible for the balloon payment if they choose not to sell their home

Noah has the easiest qualification process when you consider it’s quick online prequalification, it’s acceptance of credit scores as low as 625, it’s tolerance for high debt-to-income ratios up to 60%, and the permissible liens they allow. Permissible liens include a mortgage, a home equity line of credit, and one additional lien in conjunction with the investment from Noah. This combination of benefits makes Noah our review's best for easy qualification.

Noah funds up to $350,000. When closing on your final financing application with Noah, they charge a one-time closing fee of $2,000 or 3% of the financing amount, whichever is greater. For example, if homeowners were to finance with Noah for $200,000, they would be responsible for a $6,000 closing fee. This amount is automatically deducted from the investment from Noah. Therefore, the actual amount of cash they would receive is $194,000. 

An individual’s borrower profile, the value of their home, and the amount borrowed, all contribute to Noah’s equity share. Over the 10-year term, homeowners make no payments to Noah, and the investment does not appear on their credit report as debt. The funding is also not a taxable event. There is no pre-payment penalty if you decide to settle the investment early.

To qualify, you’ll need a credit score of at least 625, and your home must be valued above $300,000 and less than $3.5 million per the appraisal. You can have other liens on your property, but the lien-to-value ratio must be less than 85% across all your existing liens, including your Noah financing amount. None of the liens can be from a private money lender, however. If you do have private liens, they will have to be paid off using your Noah investment. You must own at least 25% of the equity in your property, and it cannot be going through a major renovation when you apply.

Noah applies a risk adjustment (typically 14% to 20%) to a home’s value based on the neighborhood profile, funding costs, home sale characteristics, and appraisals. This risk-adjusted home value is used to determine future values of appreciation and depreciation. But if these criteria are met, you can receive your approved investment within 15 days.

Noah invests in homes in 11 states across the country. The company was founded in 2016 as Patch Homes, and later rebranded as Noah in 2020. The company performed so well in the beginning that it soon acquired backing from several Silicon Valley financial technology investors including the co-founder of Airbnb. In 2019, more investors piled on, with Series A funding coming from Union Square Ventures, Tribe Capital, Techstars Ventures, and Breega Capital.

What Is a Shared Appreciation Mortgage?

A shared appreciation mortgage, or SAM, is an investment that an investor, known as a Shared Appreciation Company, makes with a homeowner to share in the risk and reward of a home’s appreciation or depreciation. The investment amount is a portion of the equity the homeowner has when they apply. The homeowner can use the cash for anything they want. It is not a loan, so there are no monthly payments to be made or interest accumulating. The investor makes their return on their investment in your home when you sell the home, or when the term ends, wherein an appraisal is done to determine the home’s value at that time. Typically, SAMs have a term length of 10 to 30 years.

The homeowner does need to keep up with their regular mortgage payments, as well as taxes and insurance. While the investor never has occupancy rights to the home, the homeowner does contractually agree to maintain the home during the life of the term agreement.

Who Should Get a Shared Appreciation Mortgage?

Shared appreciation mortgages can be useful for people who own a single-family home, condo, or townhome as their primary residence, who want to pull cash out of their equity but can't afford to incur more debt on their credit report or take on the additional monthly payments a home equity loan or HELOC would bring. Often, banks make it very difficult, if not prohibitive, for those who are self-employed, or real estate investors, to qualify for a home equity loan or HELOC. SAM companies are more lenient in these circumstances, so they offer a viable option.

The homeowner’s credit score can be as low as 600 in many cases because the SAM company looks at the full financial situation, the borrower’s income, their repayment plans, and whether the home is in a historically appreciating neighborhood.

If the home has appreciated at the time of sale or end of term, the homeowner keeps the majority of the increase. The investor takes back the cash amount they advanced to the homeowner at the beginning of the term, plus the agreed-upon fractional share (often 15% to 30%) of the appreciation as their investment return.

If the home value remains the same at the end of the contract, the SAM company gets back what they advanced the homeowner at the beginning of the term. In other words, they break even.

If the home depreciates, the SAM company’s return will be lower than their original investment. How much lower will be decided by the contractual equity share the parties agreed to at the beginning of the term.

What Does a Shared Appreciation Mortgage Typically Cost?

Shared appreciation mortgages are a lump sum payment to the homeowner, with a balloon payment due upon term settlement. At the beginning of the contract, the SAM company charges origination fees of 2% to 5% of the investment sum. The investor also discounts the appraised value of the home, typically by 10% to 20%. 

For example, a home appraised for $400,000 could be discounted 15% by the investor, making the property worth $340,000 according to the agreement. You’ll also pay for the appraisal, escrow and title fees, and recording of the lien. In the end, the SAM gives you a lump sum equivalent to 10% to 20% of your home’s equity, but receives a 15% to 30% share of ownership.

In sum, this is not a loan but rather an investment. The investment carries risk for both the homeowner and the shared appreciation mortgage company. Even SAM companies will tell you that the terms are in their favor because they are helping people who don’t have the option for prime loans from traditional lenders.

How We Chose the Best Shared Appreciation Mortgage Companies

We reviewed nine investment companies to find four that specialize in shared appreciation mortgages. To determine each company’s strengths and where they could help you best, we evaluated how much they were willing to invest, what LTV ratio they would accept, what fees they passed on to the homeowner, and the ownership share range for which they typically contracted. We also looked at how they evaluated the homeowner’s qualifications, their credit score allowances, and the ease of applying online. Finally, we reviewed term lengths, prepayment penalty clauses, and the company’s reputations.