How Sequestration Could Impact Homeownership

It’s settled: sequestration is beginning to have a real impact on federal employees, as agencies plan to start issuing furlough notices this month. Many homeowners will see a 20% drop in their income as a result of the congressional decisions, and many more will continue to struggle to make mortgage payments, as the economy negatively effects their financial situation.

Equity could be a solution to economic hardship – that is, shared equity. This was a prevalent phenomenon in the 1980s, when as now, real estate prices were considerably high. Homeowners who couldn’t make their monthly payments in full without struggling could solicit the help of a non-resident partner, who would share some of the home’s equity. This offered a way for those with expendable income to become real estate investors with less risk than a conventional landlord, and for those in need of financial assistance to source it without having to lose their homes.

The idea is that as opposed to a typical investment scenario, wherein a property is rented our to a tenant for an agreed upon price, in a shared equity agreement, the tenant – or rather, homeowner – has more of a vested interest in the property. This means they’re more likely to stick around long-term and to keep the house well maintained – both benefits for the investor. On the plus side for the homeowner, they’ll be afforded (literally) the opportunity to stay in the home where they’re settled and participate in the growth of equity as it happens.

At Colony Title, we can help you structure a shared equity agreement. Whether you’re a homeowner in need of mortgage payment assistance or an investor looking to get into the market with less risk, shared equity can be an attractive option.

If you have questions, the Maryland real estate insurance experts at Colony Title Associates can be reached by calling 410-884-1160 or visit today!

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