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| Summary / Description | bankrate.com article on Shared Appreciation Mortgage (SAM). |
| Type of Prior Art | Online Publication |
| URL | http://www.bankrate.com/brm/new... |
| Author/Creator | Michael Larson |
| Title | Lenders offer cut rates now for a future piece of your pie |
| Publication Date | September 7, 2000 |
| Publisher | bankrate.com |
| Directions to Document Location | |
| Additional Information | |
| Notes | |
Excerpt National Commerce Bancorp. of Memphis, Tenn., recently rolled out what's known as a shared appreciation mortgage, or SAM,... The loans let borrowers get lower rates and payments in exchange for sharing with their lenders part of the appreciation in value their properties experience. While the concept isn't new, ...Understanding SAM SAMs have been around in various forms for many years. Along with adjustable rate mortgages, they drew thousands of customers during the early- and mid-1980s ... Now, National Commerce thinks it can excite borrowers about the product again thanks to recent declines in housing affordability and higher mortgage rates. ...The bank has tweaked the program's parameters so lenders can earn a decent return in order to boost its chances of success. ..."The concept of sharing, say, half the appreciation in exchange for either a larger home or saving a few hundred dollars a month, which in turn they can invest in other things, is prudent and makes a lot of sense." The exact amount of the rate and payment savings depends primarily on the mortgage's loan-to-value ratio and the percentage of appreciation the borrower is willing to share. ... SAM mortgages don't come with any additional closing costs and customers don't have to pay their appreciation bill until they pay off their loans... For starters, SAM borrowers have to agree to sign away several thousand and possibly tens of thousands of dollars that would otherwise be theirs... Borrowers who plan to stay in their homes for the full 15- or 30-year terms of their mortgages face a difficult task, too. They don't have money from a home sale to cover their lenders' appreciation payments. If they haven't been putting cash aside, they may need to refinance or take out new loans to foot the bill. -- Posted: Sept. 7, 2000 |
A method for financing real estate employing a shared appreciation mortgage, comprising the steps of: a customer seeking approval from a lender for the purchase of a real estate property at a price; after approval the customer entering into a main contract for the purchase of the property; the customer obtaining a loan from the lender, secured by a mortgage over the property, to purchase the property, the loan containing a first loan and a second loan, where the first loan is a conventional principal and interest loan arrangement, and the second loan is an interest only loan where the interest rate is related to the rate of rental return from real estate properties of the value of the second loan; the customer and lender entering a residential purchase contract containing an obligation for the lender to pay to the customer an amount equal to the outstanding second loan immediately before the property is sold in order to purchase an interest in the property proportional to the value of the outstanding second loan relative to the original purchase price of the property, so that the lender and customer jointly own the property at the time of sale; and, the customer having an obligation to repay the outstanding part of the first loan and the outstanding part of the second loan upon the sale of the property; wherein, the size of the second loan is periodically reviewed.
| Relevance | See the Excerpt. |
United States