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
• Sales revenue line drawn and labelled correctly and accurately • Fixed cost line (at $1,020) labelled and drawn accurately and correctly • Total costs line (starting at $1,

You are required to compute the value of both the firms using Net Income approach.

Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (

AThe Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net incom

What is nondiversifiable risk? How is it measured? But for the returns of one-half the assets in a portfolio are flawlessly negatively correlated with the other half-which is e

Q. Benefits of the proposed policy change? Short-term sources of debt finance comprise overdrafts and short-term loans. An overdraft offers elasticity but since it is technical

Financial Ratios: Another method of measuring and monitoring performance is through the use of financial ratios and other comparative tools. Financial ratios use information

Brixton Products is considering the purchase of a new $520,000 computer-based entry order system.  The cost of the system will be depreciated on a straight-line basis over its five

How does a preemptive right protect the interests of existing stockholders? A preemptive right defends the interests of existing stockholders by providing them the opportunity to

Yellow: is the company which their stock performance was forecasted by analyst Blue: is the name of the company which made the recommendation by the analyst who work for it R