Financial

SAM: Some Banks want to have their cake and eat yours too.

With Shared Appreciation Mortgages (SAM), it's a matter of the Bank having its cake, eating it and then yours too.

SAM is a tale of two Banks who in the 1990's sold lots and lots of SAMS to many unsuspecting customers. The SAM left the market as quickly as it appeared, but has left a trail of destruction in its wake.

On paper the SAM looked great. The customer was in a Win Win situation ! The Bank lent you money against the equity of your home. It would agree to charge you a low fixed rate of interest for life. In some cases there was even no interest at all. All you had to do was agree to hand over a percentage of the increase in the value of your property when you decided to sell.

Beware the hidden agenda behind Shared Appreciation Mortgages

The maths is simple if you ignore the complicated mortgage conditions and work out the cost yourself.

Your house is worth £100,000 when you lock yourself into SAM. You agree to give SAM 25% of the increase in value from £100,000 upwards when you sell. You decide to sell when your house is valued at £300,000. This means that you owe the bank £50,000 plus the amount it lent you in the first place.

Some customers are forced to sell for reasons they have no control over such as a decline in health. It's when you sell that the Bank comes along with the knife to carve up your equity.

We are challenging one Bank over the legality of a SAM sold to our unsuspecting client. How's your SAM? Have you been stung yet?