“In his article, Alex explains how this would work in the case of a homeowner who purchased a house in 2004 for $300 000 and has since seen it drop in value by 50% to $150 000.
“In an equity-sharing arrangement, the lender would write a new loan for $150 000, retire the original $300 000 loan and, to make up for that loss, take a 50% deeded ownership interest in the property. The homeowner would also agree to split 50% of the net proceeds of any future sale of the property with the lender.
“The new arrangement would also include a buyout provision, so that if the homeowner ever wanted to take over the lender’s share, he would simply pay the lender a predetermined amount of cash.”
The idea sounds very promising, but the question is whether our local lenders will be open to such a proposal.
The four major banks are very conservative with their home loan offerings compared to Integer and other lenders who are successful because of their flexible and “out of the box” approach to property finance. Maybe they will realize that such an option could indeed be more valuable that simply repossessing properties and losing huge amount in the process.
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