Glossary · UK
What is Shared Appreciation Mortgage (SAM)?
A discontinued form of equity release, sold mainly by a small number of UK lenders in the late 1990s, in which the loan was interest-free but the lender took a share -- commonly 75% -- of any increase in the property's value when it was eventually sold.
Full Definition
A Shared Appreciation Mortgage (SAM) was a type of equity release product sold in the UK, mainly by Barclays and Bank of Scotland, between 1996 and 1998. Unlike a modern lifetime mortgage, a SAM charged no interest at all on the amount released -- instead, in exchange for the interest-free loan, the homeowner agreed to give the lender a share of any increase in the property's value between taking out the loan and it being repaid, usually on death or moving into long-term care. A common structure gave the lender 75% of the growth in the property's value for every 25% of the property's value released as a loan (so, for example, releasing 25% of the home's value entitled the lender to 75% of the total appreciation, not just growth on the amount lent). Because UK house prices rose substantially in the decades after these products were sold, many SAM borrowers or, more often, their families after their death, discovered that the lender's share of the appreciation was far larger than the original amount borrowed -- in some well-publicised cases, a loan of a few thousand pounds resulted in a repayment demand of well over £100,000, sometimes consuming most of the equity in the home. Some affected families and campaign groups have challenged the fairness of these arrangements and sought redress or renegotiation from the lenders involved, though the products themselves have not been sold since the late 1990s. Anyone dealing with an estate that includes a SAM should get independent legal and financial advice on how the appreciation share is calculated before agreeing a repayment figure, as valuation methodology and the precise contract terms can materially affect the amount owed.