What is a Shared Appreciation Mortgage?
What is a shared appreciation mortgage?
A shared appreciation mortgage also known as its abbreviation of SAM mortgage is a type of home loan granting a portion of a property's appreciation back to the mortgage lender in exchange for offering an interest rate to a home buyer that is below the market average. In this, a borrower benefits from a lower monthly home payment while the lender benefits by receiving a share of the profit when the home is sold
This type of mortgage can be structured in a number of different ways. Some shared appreciation mortgages phase out how much a lender receives in shared appreciation as a buyer retains ownership over a longer period of time.
One thing to be aware of with a shared appreciation mortgage is the possibility of a home increasing in value significantly. A homeowner could find themselves owing a lender more in shared appreciation than they owe on their mortgage.
The difference between shared appreciation and shared equity
A shared appreciation mortgage is very much like a shared equity mortgage. Both of these types of mortgages offer a more affordable way for buyers to get into a home. But with a shared equity mortgage the lending company is investing in the home in areas like covering the down payment or closing costs. This type of loan can help a borrower that does not have a large sum of cash to make those necessary payments to obtain a loan and be able to purchase a home. With a shared equity loan the lender gets back the money they put in from the down payment or closing costs when the home is re-sold.
When is it a good idea to apply for a shirt appreciation mortgage?
A shared appreciation mortgage is not widely available and not offered by the average mainstream mortgage lender. Often this loan can be offered as part of a loan modification. There are also some government and nonprofit housing organizations that offer SAM programs as part of their affordable homebuying initiatives.
The best thing to do before agreeing to any loan is to make sure and talk it over with trusted real estate professionals. It is always good to get more than one opinion. Talking with a real estate lawyer, a real estate agent, a mortgage broker, and a financial advisor are all good ideas.
For more information on purchasing real estate in Boston and surrounding areas please contact us anytime.
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