What type of mortgage allows a lender to receive interest and a share of profits from a commercial property?

A shared equity mortgage is a type of financing arrangement where the lender not only receives interest on the loan but also has the opportunity to participate in the profits generated by the property. This arrangement can be particularly beneficial in commercial real estate, where the property's value and income potential can significantly increase over time.

In a shared equity mortgage, the lender effectively becomes a partner in the property’s investment. They gain a percentage of any appreciation in value or profits, which can provide them with a higher return than traditional interest payments alone if the property performs well. This structure is designed to align the interests of both the lender and borrower, as both have a vested interest in the success of the property.

Moreover, this type of mortgage is distinct from conventional loans, like fixed-rate, adjustable-rate, or interest-only mortgages, which strictly involve interest payments without a profit-sharing component. These other options do not offer a stake in the property’s financial success, focusing purely on the repayment of borrowed principal and interest.