The deferred principal on the report refers to the part of the initial loan that the shared appreciation provision covers. This indicates that the borrower is only responsible for a portion of the house's appreciation if they sell in the first few years. If the borrower sells within five years of the adjustment, the lender receives 25% of the appreciation. A wise borrower would hold the house for all those five years and then eventually sell, since this would allow them to retain all of the house's gains.