A Look at HomeEquityShare.com
August 21, 2007 at 4:47 am by Ehab BandarHome Equity Share is a new kind of company that brings the shared-equity investment vehicles online by bringing together home buyers with investors to purchase a property together. The investor foots the down payment, while the buyers gets the mortgage. At the end of the agreement (up to 10 years), the home buyer can buy the investor’s interest in the property or they can sell and share the equity.
Ray Smith of the Wall Street Journal talks about the pros and cons of such an agreement:
These agreements can be advantageous for both parties. For instance, if the property is sold at the end of the deal’s term, the investor-owner gets back the original down payment plus a share of the proceeds from the sale. Also, the investor-owner can get a tax write-off on expenses and could receive tax deductions for depreciation.
Owner-occupiers can benefit by deducting mortgage-interest payments and property taxes on their income-tax returns. What’s more, if and when the property is sold, they qualify for exemption from capital gains — as much as $250,000 for individuals and $500,000 for couples, as long as they lived in the property for at least two out of the previous five years.
There are some risks, though. For one, the occupier-owner might fall behind in payments and even default on the mortgage, which could force the investor-owner to foreclose on the property — a lengthy and costly process. The investor-owner would have to pay out of pocket for the foreclosure process.
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