What is a Shared Appreciation Mortgage?

A shared appreciation mortgage, or SAM, is a mortgage that allows a borrower to obtain a lower interest rate in return for sharing the value of the home with the lender for a pre-determined number of years. If the borrower does not want to sell the home at the end of the pre-determined time period, the lender is entitled to its share of the increased property value in cash.


The risk to borrowers is that if they do not have the funds to satisfy the lenders share of the property value increases, they may be forced to sell the property in order to satisfy the lender's claim. The risk to the lender is that the property may not increase in value, in which case, they would be entitled to nothing more than the reduced interest rate on the mortgage loan.

This type of loan agreement should be entered into carefully. While a reduced interest rate may be enticing, it may not be worth the risk. A higher interest rate might mean a slightly higher payment, but it's typically not more than $20 to $50 per month, and most mortgage interest is tax deductible.

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