New Challenges
California homebuyers face unique challenges. High prices, limited inventory, and rising interest rates make it harder than ever to afford a home—especially for first-time buyers. But new financing options are changing the landscape. Shared-appreciation loans and deferred loans are giving more people a realistic path to homeownership in California. These tools reduce upfront costs, delay payments, and open the door to homes that might otherwise feel out of reach.
At LBC Mortgage, we understand how hard it is to buy in today’s market. That’s why we guide clients through programs that offer flexibility, affordability, and long-term value. Shared-appreciation and deferred loans are among the most promising options for qualified buyers in our state.
What Is a Shared-Appreciation Loan?
A shared-appreciation loan is a second mortgage used to help fund your down payment or closing costs. Instead of repaying the loan through monthly payments, the borrower agrees to share a percentage of the home’s future appreciation with the lender or assistance program.
This type of loan is usually repaid when the home is sold, refinanced, or transferred. The repayment includes the original assistance amount plus a portion of the gain in home value. It’s a trade-off: you give up part of your future equity in exchange for help today.
What Is a Deferred Loan?
A deferred loan is another second mortgage that typically requires no payments while you live in the home and keep your first mortgage in place. Repayment is postponed—often for as long as 30 years or until a specific trigger event, such as selling or refinancing the home.
These loans are sometimes called “silent seconds” because they sit quietly behind your primary mortgage without impacting your monthly payments. For buyers focused on cash flow and affordability, this structure offers significant relief.
Combining the Two: The Power of Shared-Appreciation Deferred Loans
Many California programs combine both approaches. The result is a deferred loan that helps cover upfront costs, doesn’t require monthly payments, and is repaid only when the borrower experiences a liquidity event. One of the most notable examples is the California Housing Finance Agency’s Dream For All Shared Appreciation Loan.
This program is built to serve first-time and first-generation homebuyers. It offers down payment support in exchange for a share of the home’s appreciation, with repayment deferred until the home is sold, refinanced, or transferred.
How the Dream For All Program Works
The Dream For All Shared Appreciation Loan is designed to close the affordability gap for California buyers. It provides up to 20% of the home’s purchase price as a second mortgage, helping with down payment and closing costs.
Key Features of Dream For All
- Eligible buyers must be first-time homeowners and, in most cases, first-generation buyers.
- Borrowers must meet income limits based on location and household size.
- The loan is silent—no payments are due until the home is sold, refinanced, or the first mortgage is paid off.
- When repayment is due, the borrower pays back the original loan plus a portion of the home’s appreciation.
- The amount of shared appreciation depends on income level. Buyers earning under 80% of Area Median Income (AMI) receive more favorable terms.
- Appreciation repayment is capped to protect borrowers from runaway costs.
This program is limited and competitive, but it provides a powerful opportunity for buyers who qualify. At LBC Mortgage, we help clients navigate the application process and assess how the repayment terms may impact their long-term financial goals.
Why Shared-Appreciation and Deferred Loans Help Buyers Own Sooner
Lower Upfront Costs
One of the biggest challenges in California is saving enough for a down payment. In high-cost areas like Los Angeles, San Diego, and the Bay Area, 20% down can mean saving more than $100,000. A shared-appreciation or deferred loan reduces or eliminates this need. That makes it possible to buy sooner instead of waiting years to save.
Manageable Monthly Payments
Because these loans are deferred, you won’t be making two monthly payments. You’ll only be responsible for your first mortgage, which keeps your monthly expenses lower. This can be the difference between qualifying and not qualifying for a home loan—especially for those with tight budgets or variable income.
Access to Better Homes
These tools expand your buying power. By covering a portion of the down payment, shared-appreciation loans can help you qualify for a higher purchase price. That means access to better neighborhoods, more desirable school districts, or simply a more suitable home for your family’s needs.
Faster Equity Building
Even though you’ll eventually share some of the appreciation, you’re still gaining equity from day one. Every mortgage payment you make increases your ownership stake. Plus, you’re no longer losing money to rent. Shared-appreciation loans give you the chance to start building wealth through homeownership much sooner than you could on your own.
Understanding the Risks
These loan structures offer clear benefits, but they come with important considerations. Buyers should fully understand the terms before moving forward.
You’ll Share Future Gains
When your home appreciates, you won’t keep 100% of the profit. A portion goes to the lender or program that helped you buy. In markets with strong appreciation, this could be a sizable amount.
Repayment May Be Triggered Early
If you sell your home, refinance your mortgage, or transfer the title, you’ll likely need to repay the loan in full, including the appreciation share. Planning ahead is critical to avoid financial surprises.
Not All Buyers Qualify
These programs have eligibility requirements. You may need to meet income limits, be a first-time buyer, or complete homebuyer education. At LBC Mortgage, we help clients evaluate their eligibility and identify alternative options when needed.
Your Home’s Future Value Matters
If the home doesn’t appreciate much—or if the market declines—you may not have as much equity as you expected. While most programs include protections, this risk should be part of your long-term financial planning.
Talk to LBC Mortgage Today
Shared-appreciation and deferred loans aren’t right for everyone. But for the right buyer, they offer a way to own a home years sooner. Whether you’re a first-time buyer or simply need help navigating California’s complex market, we’re here to help.
Reach out today and let’s explore how these innovative tools can help you make your move into homeownership.
