What is the primary goal of equity participation mortgages?

The primary goal of equity participation mortgages is to allow lenders to share in future profit. In this type of mortgage arrangement, the lender receives not only interest payments but also a percentage of the appreciation in the property’s value or a share of the profits from the property’s operation, such as rental income. This structure aligns the interests of both the borrower and the lender, as both benefit from the success and increased value of the property.

This approach can be attractive in markets where property value appreciation is expected, offering lenders a stake in the potential upside of the investment while sometimes allowing borrowers to negotiate more favorable terms compared to traditional loans. The concept revolves around collaboration between the lender and borrower, fostering a relationship focused on maximizing the property’s value over time.