SAM mortgage

Sprintrider

Hi, My parents took out a Shared Appreciation Mortgage with the Bank of Scotland in 1997, at the time the property was valued at £65000 and they took out a loan of £15750 against it.
Late last year my father passed away so we have to sell the property a 2/3 bedroom bungalow , I have had it valued by three local estate agents, two of whom gave a valuation of £300,000, this figure gives an increase of £235,000, which means us paying back £176,250 + the original loan of £15750, however, the property needs work and I think a realistic figure of between £275,000-£280,000 would see the property sell in today’s market.
What concerns me other than the horrendous increase on a small loan is if the Bank values the property at £300,000 or above and we can only achieve £275,000 are we liable for the shortfall as well ? , has anybody gone through a similar scenario?
Stuart.

Thrugelmir

The bank takes it's cut when the property is sold not on estimated values.

ssbz079

Stuart

We have come across something similar, but want to keep the house - not that easy it appears.

Loan taken out in 1997 with BOS for £22500, bungalow now valued at £300K, so we owe £180K.

i was there when the BOS's independent valuer came to view the property and he explained that they don't take into account the current state of the property, they only look at the current market in that area and then base it on that. He basically looked at other properties in the area that sold in recent months and based it on that, being my late MIL's bungalow a lot needed doing to get it up to scratch.

We are finding it hard to actually get a buy to let mortgage to pay off the debt because it is classed by many lenders as debt consolidation, even though it is a SAM.

So not much help, but we too have come across this scandalous equity release, AKA: a complete con.

miss_undastood

Although it seems like you’re paying back a lot you have to remember that there were no repayments made on the original loan and the 25% stake the bank took in the property meant they got 75% of the future gains.

The idea of these mortgages feels like a minefield to me - I’d rather interest only or repayment - if property prices are fairly flat you’re probably no worse off. But if there has been a big increase in property values such as your case then you end up paying back more than half of the cost of the house which feels like you’re paying more in terms of interest over the length of the loan than had your parents have taken out another kind of loan

It’s probably the same with anything you make a choice and sometimes you win and others you lose. No one has a crystal ball.