HOPE for Homeowners

Examples of How Equity and Appreciation Are Shared

These are examples of how the unique equity and appreciation sharing elements of this program work. Keep in mind that these are only examples, and your actual experience will depend on many things, including how much your home increases or decreases in value

1. Let’s say your home has an appraised value at the time you receive your FHA mortgage of………….	$200,000.
2. And your mortgage is 90% of this, or……....	$180,000.
3. This means the initial equity is the difference between 1 and 2, or………………………………..	$20,000.

In this example, you and the FHA share this $20,000 when you sell your home or refinance your loan. Here’s how that $20,000 would be split:

If you sell or refinance:

During Year 1	FHA receives 100%, or	$20,000	You receive 0%, or	$0
During Year 2	FHA receives 90%, or	$18,000	You receive 10%, or	$2,000
During Year 3	FHA receives 80%, or	$16,000	You receive 20%, or	$4,000
During Year 4	FHA receives 70%, or	$14,000	You receive 30%, or	$6,000
During Year 5	FHA receives 60%, or	$12,000	You receive 40%, or	$8,000
After Year 5	FHA receives 50%, or	$10,000	You receive 50%, or	$10,000

So, if you sell or refinance right after receiving the new loan, the FHA keeps the equity that was created, and you don’t receive any of it. On the other hand, let’s assume you stay in this loan and don’t sell or refinance for ten years. At that point, you’re entitled to half of the equity – in this example, that’s $10,000 – and the FHA is entitled to the other half.

In addition to this equity sharing, you will have to share any future home price appreciation with the FHA. This means that, if your home has gone up in value between the time you receive your FHA mortgage and the time of your home sale (or other disposition), you will share the amount of this increase with the FHA (less closing costs and a portion of any improvements you have made). This is a 50/50 split that does not change over time.

For example, if:

1. The value of your home when you take out this loan is…………………………………………….	$200,000
2. After some years, you decide to sell. Now the home is worth……………………………………	$250,000
3. That means the appreciation is the difference between 1 and 2, or………………………………	$50,000

In this example, you would keep half of this, or $25,000. The FHA would also receive half, which is also $25,000.

But what if the value of the home goes down?

4. The value of your home when you take out this loan is…………………………………………….	$200,000
5. Now you sell, and the home is only worth……………………………………	$175,000
6. That means the appreciation is the difference between 1 and 2, or………………………………	-$25,000

In this example, the appreciation is actually negative (the home has depreciated), so there is nothing of financial value to share. As far as the appreciation sharing feature of your HOPE for Homeowners loan, neither you nor the FHA would receive anything.

These examples assume that there are no closing costs when you sell your home and that you have made no improvements to your home.

Again, keep in mind that these are just examples, and your actual experience will vary depending on factors such as: How much your home is worth when you get a new HOPE for Homeowners loan, how long you stay in your home, and how much your home is worth when you sell.