If you’re serious about purchasing your first home this year, revisiting your wish list and desired location can help.

When it comes to financing your new home, it’s no secret that finding the right financing options can be incredibly difficult. The monthly payments can add up all too quickly once property taxes and homeowner’s insurance are factored in South Jersey. Plus, crushing student debt, rising home prices, and high demand from the millennial generation is causing a shift in the way buyers purchase their homes. These important distinctions among potential young homeowners means they are moving away from the traditional model of homeownership and toward a shared equity models. A shared equity mortgage is an arrangement under which a lender and a borrower share ownership of a property. The borrower must occupy the property. When the property sells, the allocation of equity goes to each party according to their financial contribution. Each party also shares losses on the sold property. “Ok so what does that mean exactly and what are my options?” Shared equity is designed as an alternative option for those who want to purchase or renovate a home but can’t afford some portion of that expense. Example, I’m a first-time home buyer who is currently renting. I have no trouble covering the monthly costs of renting, I even have some leftover cash for small repairs, but I can’t seem to scrape together enough for a down payment (traditionally 20% of purchase cost). This concept is also applied to current homeowners in two different manners. Those who are looking to make repairs or additions to their house can partner with lenders such as Unison Home Ownership Investments  who will provide half the cost in exchange for a proportional stake in the equity of the home. Additionally, those homeowners who are approaching retirement and looking to downsize may consider Irene Retirement. Retirees sell their home to Irene, get cash upfront and never pay property taxes, homeowners insurance or big-ticket maintenance costs again. Irene offer a brand new approach to reverse mortgages but base their cash offer on equity accumulated in the home. This process enables elderly homeowners to sell their home and remain owner-occupants or receive income from renters. A serious game changer for seniors looking to minimize expenses. The lender or investor also stands to gain from a shared equity mortgage. Their contribution is an investment and, as such, the lender will take a proportion of any value increase over the lifetime of the mortgage. If the investor is contributing to mortgage interest, they may be able to deduct that interest from their taxable income just as the principal homeowner would. The investor can also apply depreciation of the property to their taxes. A buyer seeking to extend their buying power can turn to products like adjustable rate mortgages (ARMs), interest-only loans, or interest buydown loans. However, each of these mortgage types involves a higher financial risk to the buyer than a shared equity mortgage. If you’d like to explore the basics of mortgages further visit Investopedia’s Mortgage Basics page for a full list of terminology, definitions and questions you should be asking your lender.   Read more: Shared Equity Mortgage