The ability to sustain our home building efforts over the long term is of critical importance in our efforts to eliminate poverty housing. Therefore we have implemented several mechanisms to ensure the long term sustainability of our efforts. These include the following:
- Silent second mortgage
To cover the difference between the first mortgage and the actual appraised value of the house, we also require a “silent” second mortgage. The family does not pay against this mortgage and it may be forgiven when they pay the first mortgage in full. However, should the family sell the house, the second mortgage becomes due and must be paid immediately.
- Shared equity agreement
We also require a shared equity agreement. If a family decides to sell the house within three years of purchasing it, any increase in the value of the house returns to Habitat. After three years, the increased value of the house is shared between Habitat and the family in proportion to the amount of principal the family has paid. This is done at a 2-1 ratio so that once the family has paid 50% of the first mortgage, 100% of the increase in value would go to the family.
- First right of refusal
In addition, we require a first right of refusal so that Habitat has the opportunity to repurchase a Habitat house should a family decide to sell.