Document Type

Article

Publication Date

4-2021

Keywords

Shared equity financing, Mortgages

Disciplines

Banking and Finance Law | Property Law and Real Estate

Abstract

It is the rare homeowner, or even lawyer, who thinks twice about why mortgages are part of so many real estate transactions. Real estate is expensive, and few have the money to pay cash for a home. As a result, people enter into transactions with mortgage lenders and are exposed to all of the risks that come along with mortgage financing: default, late fees, and foreclosure.

If you stripped away all of our history and our current practices in financing homeownership with mortgages, you might ask how could people with limited assets acquire something as expensive as a home? It turns out that there are all sorts of ways to divide the rights and responsibilities of homeownership to offer households just the aspects they want and no more.

A new development, shared equity financing, will make us all think twice about mortgages. Sharing the risks and rewards of a home purchase will be attractive to many, but shared equity financing also has its share of perils that are unique to it.

Comments

This article predates Prof. Reiss's affiliation with Cornell Law School.

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