The term of a Shared Appreciation Loan will be a maximum of twenty years, but no longer than the term of all other financing, including seller financing and private institutional lender financing. Upon request by the Borrower, the City may, at its sole discretion, provide one ten year extension of the term of the loan to borrowers whose incomes do not exceed 120% percent of the median income one year prior to the date the loan matures.
For conventional lenders that require secondary market involvement to make a fixed rate loan, a thirty year term may be provided.
The Borrower must make a down payment equal to at least three percent (3%) of the Assisted Unit's purchase price. In addition, where the Borrower has funds available for this purpose, the Borrower must pay closing costs. (Where such funds are not available, eligible closing costs up to $4000 may be included in the amount of the City loan.) Gifts may be used to provide up to 1% of the required 3% down payment if this is acceptable to the conventional lender.
The principal amount of the City's loan is due and payable on the earlier of twenty years (or thirty years if applicable), or upon resale, transfer, or default. In addition, the Borrower must pay to the City, as contingent interest, a share of the appreciation of the unit equal to the amount of the City loan divided by the Original Purchase Price, multiplied by the Appreciation of the unit. Transfers to a Borrower's spouse, transfer of title in conjunction with divorce, and transfers of title by a Borrower's death to a surviving joint tenant shall not require repayment as long as the Borrower's successor assumes the loan and all loan terms.
The principal amount of the City's loan shall be due and payable even in the event that there is no appreciation on the unit, or the appreciation is negative.
- The Borrower shall occupy the Assisted Unit as their primary residence. A unit shall not be rented or used primarily for commercial purposes.
- The Borrower shall not pledge the Assisted Unit as security without the prior written consent of the City.
- Units shall be resold at no less than 95% of fair market value. If so required by the City, the Borrower shall provide an appraisal at time of resale to document fair market value.
- The Borrower may make improvements to the Assisted Unit. However, only the value of documented, permanent capital real estate or fixture improvements to the property for which the Borrower received prior City approval under this program shall be deducted from the Resale Price of the Assisted Unit for the purpose of calculating appreciation. The value of capital improvements shall be determined by the City.
- Loans are not assumable, except in cases of transfer to a spouse or domestic partner, transfer to a spouse or former spouse in conjunction with a divorce or transfer of title by a Borrower's death to a surviving joint tenant.
- In order to deter speculation, in the event that the unit is sold within three years of the date of purchase, Borrower will be required to pay an additional portion of the unit's appreciation. This amount shall be equal to 30% of the appreciation in the event that the unit is sold within one year, 20% of the appreciation in the event the unit is sold within two years, and 10% of the appreciation in the event that the unit is sold within three years of purchase. This amount shall be in addition to the contingent interest due on the loan. However, in no circumstance shall the total amount due to the City as contingent interest under this provision exceed 100% of the appreciation of the appreciation of the unit.
The Housing Manager shall develop criteria under which the City may waive this provision due to hardship.
Uses of City Loan
- Acquisition (including down payment assistance and eligible closing costs) of the Borrower's unit in a building which has undergone a Tenant Participating Conversion to condominium ownership. Eligible closing costs include typical escrow and title insurance fees and reasonable financing fees for private loans. City loan proceeds may be used to fund eligible closing costs, including typical escrow and title insurance fees, up to a maximum of $4000. In addition, mortgage broker fees funded by City loan proceeds may not exceed 1.0% of the first trust deed loan amount.
- Costs of necessary repairs to the property, if any, may not be paid from loan proceeds. All repairs required under the TORCA approval or by lender must be completed prior to close of escrow unless otherwise allowed under the Charter Amendment.