SAM Mortgages Good News for Barclays Customers

EdInvestor

It would be interesting to compare how much was owed by a SAM mortgage compared with a roll-up equity release mortgage after say 10 years, in an environment of falling, stable, gently rising and rocketing house prices.

jamesd

staceylou, they got what could well have been an excellent deal, as EdInvestor hints.

Consider an equity release mortgage with interest being rolled up. If you live a good long time you can lose the whole value of your home, particularly if interest rates are high and house prices rise slowly.

Consider the SAM: live the same good, long time and you'll be left with at least 25% of the increase in property value regardless of what happens to property prices and interest rates. But it becomes more expensive than the interest rollup option if interest rates are low and house prices rise rapidly.

That makes the SAM an excellent concept for those who plan on living a long time and want to preserve a greater inheritance even if interest rates increase.

If there's one lesson to take from this it is: don't rely on your house as your source of income in retirement. In an ideal world your grandparents would have had sufficient pension income to make either of these choices unnecessary and still live a good life. To the extent that there's any trap here, it's because they presumably had no choice but to sell the house (through either type of mortgage) to live as they wanted or needed to live.

EdInvestor

jamesd wrote: »

If there's one lesson to take from this it is: don't rely on your house as your source of income in retirement.

Actually I'd have thought the lesson was not to rely on your parents' house to provide you with an inheritance.

A major reason people have had to turn to their homes for added income is the poor performance of their pensions: fortunately rising property prices have compensated, so the pensioners will be OK: it's their kids that have lost out.