Definition
Equity sharing is an arrangement where multiple parties share property ownership and equity buildup. Shared equity can help first-time buyers afford financing. Clear documentation of ownership percentages and contributions is essential.
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Equity sharing arrangements can involve family members, investment partners, or institutional investors. Shared equity can help first-time buyers obtain affordable financing by allowing family members to invest in appreciation upside while the primary occupant lives in the home. Clear written agreements are essential to specify ownership percentages, responsibilities, exit strategies, and how proceeds are distributed upon sale.
Pro Tip
Use a formal partnership agreement in equity sharing to prevent disputes.
Example
A parent and adult child purchase a home together with the parent contributing 40% of down payment and closing costs; they own the property as 40/60 partners.