Shared Appreciation Mortgage (SAM)
Definition of "Shared Appreciation Mortgage (SAM)"
A type of equity participation loan where, in exchange for charging a below-market interest rate, the lender receives a predetermined percentage of a any increase in value of the property over a specified period of time. To illustrate, a lender who would otherwise charge 10% interest, might agree to take &% interest plus one-third of the appreciation of the property. For the lender, the money received from the appreciation of the property increases the effective yield on the investment. The borrower, by agreeing to share appreciation in property value gets a lower interest rate, which in turn reduces the monthly mortgage payment. A SAM is normally written so that at the end of the shared appreciation period, the property will be appraised and the amount due to the lender through appreciation is due at that time.
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