Participation mortgage

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A participation mortgage is a mortgage wherein the lender, or mortgagee, is entitled to share in the rental or resale proceeds from a property owned by the borrower, or mortgagor. A participation mortgage may or may not require principal and interest payments, and may or may not contain a balloon payment.

For instance, John has a loan for a strip mall including 6 separate units. All are rented/leased and in addition to the principal and interest he pays to the lender, he is required to pay a certain percentage of the incoming funds. The lender is then participating in the income stream provided by the particular property.