In real estate finance, a participation mortgage is a financing arrangement in which the lender receives not only interest on the loan but also a share of the project’s gross sales or profits. This structure allows the lender to participate directly in the financial success of the development.
Participation mortgages are often used in commercial or development projects where future income or appreciation is anticipated. By sharing in profits in addition to earning interest, the lender accepts greater risk in exchange for the potential of higher overall returns.
