Housing Assistance Program Shared Appreciation Second Mortgage

About the HAP2 Program

The Housing Assistance Program (HAP2) Shared Appreciation Second Mortgage (SASM) is available to some Columbia faculty. Further details, including eligibility requirements, are below.

  • Eligibility is limited to tenured faculty members (Morningside campus only, excluding the Law School) seeking to renovate and/or purchase a primary residence within commuting distance of the University.
  • Faculty must be recommended by their dean to participate in the program.
  • All loans under the Program are subject to the approval of the Provost and University’s Chief Financial Officer.
  1. Term of loan is up to 30 years
  2. Only available where the borrower will obtain a first mortgage from a commercial lender
  3. Only available for the purchase and/or renovation of a primary residence within commuting distance of the University
  4. University SASM will be secured by second mortgage on the property, or in the case of a co-op, a second security interest in the proprietary lease and shares associated with the apartment
  5. All loans must be in compliance with the first mortgage
  6. Mortgage tax and other closing costs are the responsibility of the borrower
  7. Sum of bank mortgage and University SASM may not exceed 90% of purchase price
  8. Interest is paid monthly at the long-term monthly Applicable Federal Rate (AFR) in effect at the time the loan is made
  9. Principal payments may be deferred until the end of the loan
  10. Mortgage interest expense may be tax deductible
  11. When the loan comes due, outstanding principal will be payable along with additional interest that is equal to the lesser of:
  12. the difference between the cumulative interest paid and the University’s pro-rata share of the actual appreciation in the property, net of capital improvements (but not less than zero); and
  13. the maximum rate allowed by law.
  14. The loan will come due upon the earliest of: the stated maturity of the loan; the sale of the property; up to six months after the property ceases to be the primary residence of the borrower; and up to six months after the borrower’s full-time employment at the University has terminated (including by reason of retirement, voluntary or involuntary termination, or death).
  15. Refinancing of a previously purchased property is not available, nor is refinancing of the University SASM
  16. Title search and appraisals conducted by first mortgage lender are to be provided to the University. An engineering report is not conducted or required by the University, but should be taken under the advice of an attorney. The borrower will be required to maintain property insurance. Additional actions and documentation, including a credit check, may be required.
  17. The University SASM may be repaid in full early without a penalty

 

Shared Appreciation Second Mortgage Examples with Three Sales Prices

NOTE: Faculty are encouraged to consult with their own financial and tax advisors. This sheet summarizes the general terms of the Program; specific terms are governed by the individual loan documents.

Example 1: All principal payments deferred; interest paid monthly

Assumptions

  • $300,000 SASM mortgage for 30 years
  • AFR (for monthly payments) 3.31%
    • Monthly Interest Payment: $827.50 = $300,000 x .0331 / 12
    • Annual Interest Total = $9,930
  • Full purchase price was $750,000
    • $100,000 down payment; $350,000 bank mortgage; $300,000 University SASM Leverage Check: $350,000 + $300,000 = $650,000; and $650,000/$750,000 = 87%,  which is < 90% property sold after 10 years.  

Calculation of Additional Interest on Shared Appreciation Mortgage Due at Sale

Example 2: Principal and interest paid monthly

Assumptions

  • $300,000 SASM mortgage for 30 years
  • AFR (for monthly payments) 3.31%
    • Monthly total payment fixed = $1,315.52
    • First monthly payment = $488.02 principal + $827.50 interest
    • Subsequent payments increase principal and decrease interest
    • Total interest payments Year 1 = $9,840.33; 10 years = $88,556.14
  • Total principal payments Year 1 = $5,945.89 10 years = $69,306.07
  • Full purchase price was $750,000
    • $100,000 down payment; $350,000 bank mortgage; $300,000 University SASM
  • Leverage Check: $350,000 + $300,000 = $650,000; and $650,000 ÷ $750,000 = 87%, which is < 90%
  • Property sold after 10 years

Calculation of Additional Interest on Shared Appreciation Mortgage Due at Sale