Everything about Participation Mortgage totally explained
A
participation mortgage is a
mortgage wherein the lender, or
mortgagee, is entitled to share in the rental or resale proceeds from a property owned by the borrower, or
mortgagor. A participation mortgage may or may not require and
interest payments, and may or may not contain a
balloon payment.
For instance, John has a loan for a strip mall including 6 separate units. All are rented/leased and in addition to the principal and interest he pays to the lender, he's required to pay a certain percentage of the incoming funds. The lender is then participating in the income stream provided by the particular property.
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