Rookery Farm
Mile Hill
Porthtowan
Truro TR4 8TY

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Entering into a shared appreciation mortgage has long term implications for both you and your beneficiaries and you should not proceed lightly with any form of releasing cash from the equity in your home, without taking independent financial and legal professional advice. You should also consider the other alternatives, such as downsizing, sale and rent and other forms of equity relese. If you fail to do so and make a mistake it will be difficult and expensive, if not  impossible, to rectify it and there are often better solutions available.

The links below will take you to a series of calculators where you can compare the options and may help you to decide whether or not the limitations of any future shared appreciation mortgage plan are suitable for you.  Please note, however, that not every shared appreciation mortgage will necessarily provide a lump sum. Some lenders might offer income only through an annuity arranged by them and you might get a better annuity elsewhere by shopping around, using the lump sum method. This is something you should check carefully.

Equity Release.....The Choices.....The Shared Appreciation Mortgage

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Advantages

No regular repayments to make.

The loan could end up costing nothing if your home’s value has not increased or if it has fallen.

You might be offered the option of a low fixed interest for a higher loan of up to 75%, thus making the shared appreciation mortgage suitable for home purchase.

Disadvantages

If house prices rise strongly, the effective cost of the loan could be very high.

If you need to move home in the future after a period of strongly rising house prices, you may find that you can only afford a much smaller/cheaper property.

Not currently available due to mortgage securitisation difficulties. (This is a process the lender may invoke to raise further capital for future issues).

Very few, if any, lenders would be interested today in setting up such an arrangement, particularly in the current economic climate. The combination of the difficulties in raising capital through securitisation, and in resolving the question of unfair gains to the lender whenever high property inflation occurs is such that it would be an unprofitable and unproductive exercise from their point of view.. So it is quite possible that we may never see them again as an equity release option.

The Shared Appreciation Mortgage, as an equity release solution, disappeared at the end of the 1990s due to the difficulties lenders encountered in securitising the loans in order to raise further capital to lend; a rather similar problem to the one Northern Rock faced in 2008.

You borrow a lump sum based on the value of your home and there are normally no repayments until you die or the property is sold. Then the amount you originally borrowed is paid back plus an agreed percentage of the amount by which the home has increased in value. The original shared appreciation mortgage, as marketed by Bank of Scotland and Barclays Bank, lent 25% of the property value and took 75% of any subsequent increase in value. However, shortly thereafter, the completely unforeseen rapid rise in property prices greatly distorted the fine balance of the profit share between the borrower and the lender and there was a general outcry as to the unfair treatment of the borrowers.

So the shared appreciation mortgage was put to bed and is not currently available. For those who are interested, there is an excellent history of the ideas involved and the early development of the shared appreciation mortgage at

I recently succesfully challenged a DWP statement that a married couple were not entitled to  Pension Credits. As a result, their income was increased by almost £175 per month

The Mortgage Shop is a retired IFA that no longer gives direct advice on or arranges Equity Release. Instead, it passes your enquiry to a fully qualified and licensed professional firm, in your local area,
that will do this for you. This is a FREE referral service to you, without any obligation, and you are completely at liberty to negotiate with the firm concerned the terms for their advice and services. The information provided is on the basis of our understanding of UK tax law and Inland Revenue practice and is subject to change.  This site is intended for persons aged 18 or over, resident or ordinarily resident, in the United Kingdom. email: bobstark@mortgagefor.me.uk

This is about Equity Release Plans. To understand the features and risks, ask for a personalised illustration. The actual APR rate available will depend upon your circumstances.

The Mortgage Shop will be pleased to discuss your objectives and to put you in touch with an approved local specialist firm that arranges equity release.