Shared appreciation mortgage (SAM) - How To Discuss

Mortgage, arranged (written) usually at below-market interest rates, entitling the lender (mortgagee) a portion of increase in the value of the mortgaged property within a specified period. At the end of the period, the borrower (mortgagor) must either sell the property or pay the mortgagee its share of the appreciation (if any) in the value of the property. Also called shared equity loan.

A shared appreciation mortgage (SAM) is when the borrower or purchaser of a home shares a percentage of the appreciation in the home's value with the lender. In return for this additional compensation, the lender agrees to charge an interest rate which is below the prevailing market interest rate.

A shared appreciation mortgage (SAM) differs from a regular mortgage during the resale of the property. With a standard mortgage, the borrower pays the lender the principal owed on the loan plus interest over a set number of years. When the borrower sells the house, the proceeds from the sale are used to pay off the mortgage if there is still a balance owed to the bank.