Don’t rely on SAM to help you with debt
Patrick and Valerie Jacobs are suffering severe debt as a result of borrowing against their home several years ago. Their home was valued at £180,000.
The couple took part in a shared appreciation mortgage scheme in the mid nineties which allowed them to borrow £45,000 interest free on the condition that when their home was sold, they agreed to pay three-quarters of the property’s appreciation value.
However, since borrowing, the price of their home has escalated to a massive £400,000. As a result, they are now in debt to the value of £210,000 which is three quarters of the £220,000 increase in value plus the original £45,000 loan. This equates to an interest rate of 367%.
As the Jacobs are both in their late seventies, they are finding it difficult to maintain their large house along with accumulating debt. However, if they sell their home, they would barely be left with £190,000 to buy smaller accommodation.
Patrick realises that he made a bad decision by taking out a SAM but he didn’t realise that he would sign up for a debt that would triple in just eight years.
The couple have sent a letter of complaint to the bank concerned, but have received little in the way of a satisfactory response.
Whilst many are criticising loans for their high interest, the Jacobs would have been better off with a fixed-rate plan at 9.5% which would have left them with a debt of just £93,000 which is less than half of what they currently owe.
Finance News posted on 02/10/2007 16:15:56
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