1

A method for financing real estate employing a shared appreciation mortgage, comprising the steps of: a customer seeking approval from a lender for the purchase of a real estate property at a price; after approval the customer entering into a main contract for the purchase of the property; the customer obtaining a loan from the lender, secured by a mortgage over the property, to purchase the property, the loan containing a first loan and a second loan, where the first loan is a conventional principal and interest loan arrangement, and the second loan is an interest only loan where the interest rate is related to the rate of rental return from real estate properties of the value of the second loan; the customer and lender entering a residential purchase contract containing an obligation for the lender to pay to the customer an amount equal to the outstanding second loan immediately before the property is sold in order to purchase an interest in the property proportional to the value of the outstanding second loan relative to the original purchase price of the property, so that the lender and customer jointly own the property at the time of sale; and, the customer having an obligation to repay the outstanding part of the first loan and the outstanding part of the second loan upon the sale of the property; wherein, the size of the second loan is periodically reviewed.

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2

A method according to claim 1, wherein the second loan is reviewed upwards or downwards at each review.

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3

A method according to claim 2, wherein in the event the customer wishes to reduce the repayments, the second loan is increased to allow part of the first loan to be reduced.

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4

A method according to claim 2, wherein in the event that the customer wishes to increase the repayments and acquire more equity in the property, the second loan is reduced.

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5

A method according to any preceding claim, comprising the further step, in the event of the customer defaulting on any loans provided by the lender, the lender exercising the residential purchase contract to acquire the interest in the property and force a sale of the property.

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6

A method according to any preceding claim wherein the interest rate on the second, interest only loan is reviewed periodically.

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7

A method according to claim 6, wherein the interest rate on the second, interest only loan is calculated as follows:

monthly interest payment = P *(a/b)*(x /12) where:

P is the principal amount provided being the second loan;

a is the property price index for the last day in the calendar quarter which has most recently passed for the area where the property is located;

b is the property price index for the last day in the calendar quarter which was immediately before the day of purchase; and

x is the market rental rate (expressed as a percentage per annum yield on the value of a property) for properties of like type and condition in the area where the property is located and less 2% (or such other percentage as determined appropriate from time to time) provided always x shall not be less than 1.5%.

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8

A method according to any preceding claim, wherein, in the event that the customer wishes to buy any interest that the lender is entitled to purchase under the residential purchase contract, they are entitled to purchase it at a price equal to the lender's original purchase price inflated by a factor related to the increase in property prices since the original purchase.

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9

A method according to claim 8 wherein the customer purchases all or part of the interest, and the percentage interest in the property being acquired by the customer is calculated as follows:

PIBP = FP/PP*a/b*100 where:

PIBP is the percentage interest being purchased;

FP is the funds provided by the customer for the purchase;

PP is the total purchase price that was paid by the customer;

a is the property price index for the last day in the calendar quarter which has most recently passed for the area where the property is located; and

b is the property price index for the last day in the calendar quarter which was immediately before the day of purchase

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10

. A method according to any preceding claim, wherein the percentage interest the lender holds at any time is calculated as follows:

CVI = (C2P/PP*100)-AIP where:

CVI is the lender's interest in the property expressed as a percentage;

PP is the total purchase price that was paid by the customer;

C2P is the contract price which was advanced under the second loan at the time of purchase; and

AIP is the sum of any percentage interests acquired from the lender at any time since the purchase.

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