Equity participation in residential homes has been around for decades, going back to the 1970’s according to an independent report by Fannie Mae released in 2007. The concept was shared-equity mortgages to encourage housing affordability and ownership. Bank of Scotland issued a shared-appreciation mortgage in the UK in the mid-1990’s with a very long-term and high appreciation ratio of three to one (60% appreciation on a 20% loan).  In 2010, around £800 million of equity was released by UK home owners using regulated equity release with this rising year on year to £1.38 billion in 2014. In the UK, minimum age to participate with most programs to extract equity (home reversion) is 65 years old.

In affordable housing in the U.S.,  shared Appreciation clauses are also used by non-profits and local governmental agencies. These shared appreciation loans are structured as second mortgages, but are considered “silent” in that borrowers make no payments until they sell the home (or, in some cases, refinance the first mortgage). At the time of sale or refinance, the family is required to repay the full amount of the loan plus a portion of the home price appreciation.  In this way, the amount returned to the subsidizing entity is based on increases in home prices, which helps to preserve the “buying power” of public subsidies.

There has been several other companies that have entered this space, although the primary point of entry is for existing homeowners, not first time home buyers. 

Cleardoor is providing a solution for affordable financing by providing equity financing, lower housing expenses for first time home buyers. Our online platform is for prospective homeowners to purchase a home with equity financing with only three percent down. We match a third-party passive investor(s) to  fund the difference of 97% while we manage the relationship over the initial five year term.

Equity participation is now offered to the masses, retail and non-accredited investors in the U.S. through crowdfunding and will continue to evolve, helping deleverage tU.S. mortgage market while encouraging homeownership to build wealth and security for families.