share-appreciation mortgages (sams), Financial Management

High interest rates in the early 1980s brought about this innovative mortgage arrangement. SAMs use inflation as a way of paying for the property. The lender agrees to charge a very low level of interest on the funds and in turn, the borrower agrees to share a part of the increase in the property value with the lender when the loan matures, or when the property is sold or at some other specified time.

When SAMs came into existence, one-third participation was popular; the lender would agree to decrease the interest charged by about a third of the prevailing rate in return for one third of the appreciation in the property value.

For the borrower, SAMs are attractive as he/she can purchase an otherwise unaffordable home. The lender has the potentially lucrative equity kicker, depending on the rate of inflation. However, the disadvantage with SAMs is that they are not standardized and hence cannot be pooled, packaged into units and sold as securities.

Posted Date: 9/8/2012 7:42:05 AM | Location : United States







Related Discussions:- share-appreciation mortgages (sams), Assignment Help, Ask Question on share-appreciation mortgages (sams), Get Answer, Expert's Help, share-appreciation mortgages (sams) Discussions

Write discussion on share-appreciation mortgages (sams)
Your posts are moderated
Related Questions

Meaning of Returns The return from holding an investment over some period - say, a year, is simply any cash payments received due to ownership, plus the change in market price,

MARGINAL ANALYSIS It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sides

Determine the amounts to be recognised in profit or loss and in other comprehensive income in respect of the property for the year ended 31 December 2010.   Evaluate the compliance

evaluate the importace of leverage in financial management of a small scale company

a) Describe five factors that should be taken into account by a businessman in making the choice between financing by short-term and long-term sources.

Above the line deductions are certain kinds of deductions that are deducted from your income before the adjusted gross income is computed for tax purposes. Above the line deduct

Q. How to calculate correlation co-efficient? The correlation co-efficient measures the nature and the extent of relationship between the stock market index return and the stoc

RISK RETURN RELATIONSHIP A business operates in a market environment, which is not within its control. It is exposed to several dangers from the internal with external sources

What are the types of firms that securities firms and investment banking industry included? Into the USA, the securities firms and investment banking industry comprises several