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Saving For a Space Ship

Lawyer V Banks Over Shared-appreciation Deals (sams)

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http://www.guardian.co.uk/money/2009/jan/2...tgages-property

The Guardian, Saturday 24 January 2009

They were billed as the answer to cash-strapped pensioners' prayers: zero-interest loans where borrower and bank would "share" in any appreciation in house prices.

But a dozen years after they were heavily marketed, "shared appreciation mortgages" (Sams) have left thousands of elderly people stuck in their homes. If they want to downsize, adapt their property, need sheltered accommodation or require a care facility, they have to surrender the great bulk of their home's value to Barclays or Bank of Scotland (part of HBOS) - the two banks that sold Sams - which means they cannot move anywhere more suitable.

Here are just some of those affected:

• Trowbridge, Wiltshire, homeowner John Beech borrowed £38,500 from Bank of Scotland in 1998 on a £153,000 property. He wants to move, but will have to repay £257,500 from a likely £440,000 sale proceeds.

• Tiverton, Devon homeowner Ivy Winstone, 85, will have to pay £115,000 on the sale of her property, after borrowing just £17,500 11 years ago from Bank of Scotland. She cannot move: the £80,000 left from selling her bungalow will buy nothing in her area.

• Maureen Putnam of Dorchester, Dorset, will have to pay Barclays £127,500 for a £30,000 loan. This would leave her £115,000 from a sale.

• A Yorkshire homeowner said last week he would have to pay £236,000 on the sale of his property, for borrowing just £48,500. He wanted to maximise assets to pass on to his children. He died unexpectedly earlier this week.

Edited by Saving For a Space Ship

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THey took legal advice before they signed them - if you borrow money and don't pay any interest off that's what happens - it ends up as a fortune. Welcome to the world of compound interest.

Sod them, a relative moron could see they could and would cost a fortune - and almost everyone has been saying they are not a good idea if you want to leave any money/value in your house to your children.... now they are just moaning about the cost - they were not when they took the cash and spent it [often] on rubbish.

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In addition to having to pay some of the profits they would make from any sale, did these people have to pay interest on the loan?
typically not. It's priced in to the amount of appreciation and hence the amount of borrowing. What's happened is that the house value has rocketed so the bank get a higher return than expected - and the borrower has also had a much larger return, but does not want to give part of it to the bank, like they legally agreed to when they took the 30 pieces of silver.

It's just bleating from the people who will no doubt all claim they were too stupid to understand it, but were not stupid in taking it and spending it.

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typically not. It's priced in to the amount of appreciation and hence the amount of borrowing. What's happened is that the house value has rocketed so the bank get a higher return than expected - and the borrower has also had a much larger return, but does not want to give part of it to the bank, like they legally agreed to when they took the 30 pieces of silver.

It's just bleating from the people who will no doubt all claim they were too stupid to understand it, but were not stupid in taking it and spending it.

So the banks just want the proportion of the sale value that reflects the proportion of the property they own?

And the little old lady in the house has had the benefit of the use of the whole of the property, while only owning part of it.

Sounds like the old gits have nothing to moan about; they did well out of the deal.

On the other hand, if they can stuff the banks, power to their elbows.

I think the winner will be the shyster lawyer charging £5k though.

Edited by happy_renting

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When house prices have fallen 50% the arguing will stop. Only the lawyers will have made money.

I was an expert witness in a case a few years ago where exactly this had happened with an industrial facility. Prices of inputs had changed dramatically and the plant was making a lot more than the original owner had expected when he had sold it and now wanted more money.

They got short shrift from the judge. I was on the winning side. The two parties are stil in the contract and the prices of inputs are now such that the buyer is making a lot less money and the seller is getitng the best of the deal.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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