Knowledge is power, and we’ve got news on shared appreciation mortgages in 2025.

Is it a modern equity release term or no longer relevant?

Our SovereignBoss team has done extensive research on everything related to the retirement mortgage market and what’s relevant in 2025.

Here’s what we have to share.

What’s a Shared Appreciation Mortgage (SAM)?

A shared appreciation mortgage (SAM) is a unique mortgage arrangement where the lender offers a loan at an interest rate below the market rate.

In return, the lender receives a portion of the home's appreciation when it is sold or refinanced in the future.

Essentially, the borrower gets a lower interest rate upfront, but they agree to share a percentage of the home's future increase in value with the lender.

Why Choose a Shared Appreciation Mortgage Over a Regular Mortgage?

Shared appreciation mortgages can be attractive because they offer lower interest rates than regular mortgages. 

This reduces the cost of borrowing and can make homeownership more affordable in the short term. 

However, it's important to note that SAMs can end up being more costly in the long term if property values significantly increase.¹

Shared Appreciation Mortgages vs Regular Mortgages

With regular mortgages, borrowers pay the interest and principal over time to gradually build home equity. 

The borrower retains 100% of the home's appreciation.

In contrast, a SAM provides a lower interest rate, and in return, the lender takes a share of the home's appreciation when the property is sold. 

This means that the total cost of a SAM can be uncertain and potentially high if the property appreciates substantially.

Typically the share of appreciation value was calculated on a 3 to 1 basis, which means if you borrowed 15% of the value, then 45% of any future growth is then due to the lender, along with the original capital amount.

Thanks to regulatory bodies like the Financial Conduct Authority² and updated legislation prohibiting unfair agreements, SAMs of this nature are now obsolete. 

Modern equity release agreements adhere to strict enforcement and oversight measures, ensuring customer protection.

Are There Different Types of Shared Appreciation Mortgages?

The basic concept of a SAM is the same across different types – a lower interest rate in exchange for a share of future home appreciation. 

However, the specifics can vary.

For example, the percentage of appreciation the lender receives and the loan's interest rate can differ between products.

Is There a Minimum Age Requirement for a Shared Appreciation Mortgage?

In general, there are no specific age requirements for obtaining a SAM. 

However, these products are typically targeted toward older homeowners looking to tap into their home equity without selling.

What Are the Pros & Cons of Shared Appreciation Mortgages?

The pros and cons of shared appreciation mortgages include lower monthly payments but loss of future equity. 

Let’s take a closer look.

Pros of Shared Appreciation Mortgages

SAMs provide a lower interest rate, making them an attractive option for borrowers who need immediate cash but expect to have a lower income in the future. 

They can also be beneficial if the property's value remains stable or decreases, as the borrower won’t have to share any appreciation.

Cons of Shared Appreciation Mortgages

The biggest disadvantage of a SAM is the potential cost. 

If a property appreciates significantly, the borrower could end up owing a large amount to the lender. 

Additionally, SAMs are less flexible than other mortgage types – if a borrower decides to sell or refinance, they’ll typically have to pay the shared appreciation to the lender.

What Are the Alternatives to Shared Appreciation Mortgages for Equity Release?

The alternatives to shared appreciation mortgages (SAMs) for equity release include lifetime mortgages, home reversion plans, and retirement interest-only mortgages (RIOs).

Here are more details on each of these options.

Lifetime Mortgages 

Lifetime mortgages allow homeowners to release a portion of their property's value as a tax-free lump sum or in regular withdrawals, with interest accruing on the loan until it’s repaid after the homeowner's death or move into long-term care.

Home Reversion Plans

With a home reversion plan, homeowners sell a percentage of their property to a reversion company in exchange for a tax-free cash lump sum or drawdown facility. 

They can continue to live in the property as tenants without paying rent (in most cases) until they pass away or move into long-term care.

Retirement Interest-Only Mortgages

Retirement interest-only mortgages (RIOs) enable homeowners to borrow against their property's value and make monthly interest payments until they die or enter long-term care, with the loan repaid from the sale of the property.

Each of these alternative options has benefits and considerations, and individuals should carefully assess their financial needs and goals before choosing the most suitable equity release solution. 

Consulting with a financial advisor is essential to make an informed decision.

What Are the Legal Considerations When Opting for a Shared Appreciation Mortgage?

SAMs can be complex products with significant implications. It’s crucial to get legal advice before entering into one. 

Considerations include understanding the agreement terms, how much the lender will receive if the property appreciates, and potential impacts on inheritance.

IMPORTANT Facts About Shared Appreciation Mortgages 

In the UK, shared appreciation mortgages have a controversial history. 

They were sold to a number of borrowers in the late 1990s,³ and many homeowners found themselves trapped in deals that didn't account for the extensive rise in property prices. 

This left many owing far more than they had anticipated, leading to legal challenges and calls for compensation. 

Borrowers also found themselves unable to move, as they were unable to sell their homes due to the 75% of equity being taken, and the market value of the properties around them rocketing, rendering them unaffordable to the borrower.

These loans were sold before the market was regulated, as the Financial Services Authority⁴ only started to regulated the mortgage business in 2004,⁵ and was then replaced by the Financial Conduct Authority in 2013.⁶

Back then

Banks operated on a voluntary basis under the Banking Code, and mortgage lenders under the Mortgage Lenders Code. 

Consequently, banks falling under the purview of the Banking Code were required to join the Financial Ombudsman Service. This granted the service the authority to address any concerns or grievances from customers who may have experienced mistreatment.

The lenders created separate companies to administer the mortgages, despite selling them under their very recognisable corporate branding.

Those companies had not signed the Banking Code and were also not within the purview of the Financial Ombudsman Service.

As a result, any cases brought to the Financial Ombudsman Service haven't been successful unless there was proof that the mortgage was mis-sold to the client. 

However, due to amendments made in 2006 to the Consumer Credit Act of 1974, this product would now be classified as unfair to the customer, and the loans could be challenged.⁷

Litigation

In 2009, Hilary Messer of RWP Solicitors created The Shared Appreciated Mortgages Action Group.⁸ 

The primary function was to assist affected borrowers in the shared appreciated mortgages scandal, and £1.5 million was raised for group action.

Unfortunately, the courts never heard the case due to banks’ appeals, and this left the complainants owing a hefty amount in their banks’ legal costs.

In order to waive the costs, the complainants signed a non-disclosure agreement. 

To that end, the current litigators have taken out insurance to cover those fees should the claim not be successful.

At the time of writing, Barclays has settled a group litigation of 37 claimants with regards to the mis-selling of shared appreciation mortgages.⁹

Another group litigation consisting of over 150 claimants is being brought against the Bank of Scotland in connection with the shared appreciation mortgages sold by them.¹⁰

Common Questions

In Conclusion

Shared appreciation mortgages (SAMs) offer a distinctive approach to home financing by offering lower initial interest rates in exchange for a share in future property appreciation. 

While they can be beneficial for those seeking immediate reductions in borrowing costs, the long-term implications and historical debt burdens in a rising property market should not be ignored.

Furthermore, their impact on estate value and inheritance, and the lack of flexibility in exiting from such mortgages, calls for thorough analysis and legal consultation before considering such a financial decision. 

Always remember, your home is likely to be your most substantial asset; understanding the full implications of financial decisions like shared appreciation mortgages is crucial to protecting and managing this valuable resource.