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Shared down payment program… Would you do it?

1760 Views 17 Replies 8 Participants Last post by  dougbos
I came across this company Lotly that offers a shared down payment program. The way it works is that:
  • I put in 5% down payment, and Lotly put in another 15% down payment. I can use all this money to buy a place.
  • I will pay for all monthly costs like mortgages & maintenance. I get to keep all the equity I pay down through mortgage payments.
  • Towards the end, I will pay roughly 50% of home appreciation to buy out Lotly.

Just thinking out loud here, the pros I can see is that
  • I could really use some help on down payment to buy the place I want
  • There is no monthly payment to Lotly
  • I keep all the equity I pay down on my mortgage every month. Better than renting!
  • Seems like renovation is allowed

The cons:
  • 50% appreciation is quite a bit to give away, especially if the market does well
  • My monthly payment is likely to be higher than what I’m paying for rent atm
  • I can’t sell the place in the first 3 years

This program sounds quite interesting to me. What do you folks think of this?
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For clarification - how exactly does the recognition to your payment of the mortgage work? The portion of debt reduction (increase in equity) from mortgage payments should be quite modest as most of the payment is going to interest.
I think it will be settled at the end of the term when I sale the property or refinance. Also you are 100% right that I would build less equity over the years with the current interest rate.
... if you really want to be a "homeowner" (first time only), then this program can help.
Just curious why you think this would only work for the first-time homeowner?
The CMHC offers a much better shared equity mortgage program.
Thanks for sharing this! I didn't know CMHC offers a program like this. I wonder how it is like to work with CMHC on this. Are they gonna be as slow as they normally are...

The company said that in a falling market, investors will share the same percentage of loss as they would for the upside. The thing is I wouldn't want to sell or refinance if the property value is lower than what I bought it for, because I would also lose part of my downpayment. In that case, it's better if I can extend my 10 year term, hoping that the market will come up eventually.
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