 Sam
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Joined: 21 May 2005
Posts: 286
Location: CALIFORNIA
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 Posted: Mon Apr 05, 2004 12:23 am Post subject: Shared Appreciation Mortgage |
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The Shared Appreciation Mortgage (SAM) is a new home mortgage concept having fixed rate and fixed term loan up to maximum of 30 years. For availing SAM, the buyers need to pay less interest rate (maximum of 2%) to the lenders providing a share of the future appreciation value of the home. The interest rate directly depends upon the home appreciation.
To get SAM, the buyers needs to fulfill the criteria stated below:
- Buying a home for the first time or not owned during the last 3 years.
- To fulfill all the criteria for purchasing home for the first-time.
- Based on HUD (US Department - Housing and Urban Development), the income of applicant should be under 80% MFI (Median Family income).
Prepayment penalty restricts the homeowner to go for refinancing for avoiding sharing the home appreciation. Suppose, the total payment is more than the 20% of the outstanding balance of the loan during the first 3 years of the loan as done by the buyer, then he/she is penalized for prepayment in different ways:
- 2% of the excess of 20% of the outstanding balance of the loan, Or
- 6 month stated interest of 20% of the outstanding balance of the loan, Or
- As per state law.
For example, Andrew took a loan of $400,000 for 5 years from Jack to purchase a home valued $600,000. Jack gave the loan at a very low interest rate, suppose at 2% interest rate. After 3 years the value of the home increased to $900,000; and then in return, Andrew gave him a portion of the appreciated value ($300,000) of the home. This type of mortgage is known as 'shared appreciation mortgage. |
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