Thank you for your enquiry for a Shared Appreciation Mortgage
Each person has unique and individual circumstances and requirements, and our recommendation for your Shared Appreciation Mortgage will reflect your own personal needs.
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Shared Appreciation Mortgages give the lender part of the share of appreciation. They do this by lending the buyer money and making an agreement to receive some of property value after it increase in time.
Sometimes Shared Appreciation Mortgages can benefit the lender more than they can benefit the buyer. If the lender knows the market is going to increase ahead of time and then sell to buyers, the lenders end up with a huge percentage of the profits. There are some who end up being ripped off with shared appreciation mortgages and many seniors have fallen victim to swindles. Since seniors are obviously going to die sooner than the average person does, the seller can count on making their profits sooner.
Shared Appreciation Mortgages began in 1996 with the Bank of Scotland. The normal procedure is simply offering 25 per cent property value to the buyer while they receive 75 per cent of the property value later on.
If the market price does not rise sharply or decrease, then this could be beneficial to the buyer. They could end up with a discounted mortgage because then they would save on payments and interest rates. Although it seems like a good deal initially, when the buyer decides to sell, they could find themselves owing the bank an enormous amount of money if their home’s value greatly increases.
One of the drawbacks to the both the seller and buyer with Shared Appreciation Mortgages is that there may not be a large incentive for the buyer to spend money on many home improvements to increase the house cost. Increasing their home value only ends up costing the buyer more in the end so may in fact skimp on repairs to decrease the value. These things are best agreed upon ahead of time and included in contracts.
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The Mortgage train is a trading style of SourceIFA Limited. Registered office Argyll House, 158 Richmond Park Road, Bournemouth, Dorset. BH8 8TW Registered in England and Wales No. 06363148. This website is produced for information only and does not constitute or offer advice.