Tuesday, May 13, 2008
SAM - Surface to Air Missile? - yep...pretty much
Independent: Ask Annie: They call it equity release but these homeowners are trapped
SAM = shared appreciation mortgage.....
If house prices had increased by 'sensible' and sustainable levels then this would not be a problem. I suppose you could always sell your house at a knock down price so little or no appreciation (?)....screw the banks I say!
see also: www.safe-online.org
Posted by rental john @ 01:58 PM (169 views) Add Comment
4 Comments
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1. little professor said...
Well, the good thing about the house price crash is that these people won't have to pay back as much money, as there won't be much "appreciation" left to share!
2. plato said...
In effect -- well no ! --- In Fact :--- The bank got the house for a fraction and people got a few more nights sleep in peaceful ignorance of what they had actually done. Until Now.
The one sided motion of this little game has changed. So for all you people in this position an HPC would be a saviour You need it.
3. montesquieu said...
Actually HPC wouldn't help as the 25% these people get left with will get even smaller.
This is certainly a case where the banks benefit massively but there's a bit of hyperbole with the special-interest group pleading ... I mean there would never have been enough left to buy a house out of what they were getting back.
So it's not really about what these people get ... it's about the cut of the house the next generation is left with. If it was my aged parents I'd be upset too but the deal seems to have been reasonably clear at the time. A contract is a contract and while we should certainly protect people from con men, we shouldn't (and can't realistically) protect everyone who makes a dumb financial decision from the consequences of that.
It's like endowment mortgages. I looked at those in the 80s and though - smells fishy. So I took a repayment mortgage, against all popular wisdom. Fast forward and everyone who signed up for one of these gets a handout just for filling out a form.
We should not bail out the financially illiterate.
4. jimmy_joe said...
Why are these guys complaining? It looks like a good deal to me!
The bank's 75% of the appreciation is £150,000 so the parents will get £50k + the purchase price of £15k. Take off 25% of the purchase price as a capital repayment and £2k for the arrangement and you've got £61248. £61k for sitting on your ar5e for a decade is good money in anyone's books, but when you're doing it rent-free it's even better. If they paid what would have been their mortgage into a savings account (I'll assume £100/month) they would have another £12k, more if invested wisely. For spending £2k on an almost zero risk gamble, they've done very well indeed.
There might be other benefits too. Would the bank contribute to the buildings insurance and maintenance?
I couldn't afford £15k for a house in 1997 so my equity is rather less than £50k now. Where's my compensation? If I'd known then about this sort of opportunity I would be better off now than I am.