They should have taken out one of those lovely 1980s endowment mortgages instead when at the end of the term a massive investment fund would mature and enable them to pay off the capital, buy a Ferrari and go on a luxury safari in South Africa.

I came across a heinous 1990's mortgage product yesterday called a share appreciation mortgage.  Basically the bank lends you say 25% of the value of your property and there's no interest and no payments but when you die or sell the property you have to pay the bank 75% of the sale price.  So in the case I've seen they borrowed just over £65k but now have to pay around £525k.  It seems that the percentage the bank takes to redeem it was always three times the original LTV.  Unsurprisingly these things were only available for two years or so before being banned.

There was absolutely nothing wrong with SAMs and the people complaining are mostly children who thought they were on for some massive inheritance but their legally advised parents forgot to mention that it had been signed over to the bank. Not only was there no interest to pay, if the property value fell the bank lost out. 

An IO mortgage, without a principal repayment plan is a better form of renting, allowing people to live well beyond their real means, with the possibility of tax free capital appreciation.  It's not seen like that, of course.

I’m absolutely sure that the people who were pushing that product weren’t on an absolutely massive personal commission for each sale hanners.

Absolutely nothing wrong with rinsing people for an 8 times return.  Even taking double the original percentage would be punchy and back then equity release wasn't regulated.

It was a gamble. People were informed and willingly took it and they were able to release equity ‘on the cheap’. Imagine paying no interest… as I say it’s the inheritance grabbing children who are complaining. 

If the house price had fallen, or even risen  little, the bank would have lost. 

True but still a massively one sided gamble.  It's like doing the Lottery every weekend without paying only for Camelot to take 75% of all of your winnings if you win.

Hanners being interviewed on the subject of SAMs

https://www.youtube.com/watch?v=Pn0WdJx-Wkw

Bear in mind that at the time they were designed, house prices had performed better than inflation but worse than equities. 

Sails, your lottery example is a brilliant deal. You pay nothing to enter and keep 25pc of all winnings? Sign me up for this risk free profit!

Heh, I agree on the lottery point tbftbf 

Be my guest as I don't think 25% of a free lucky dip is going to be life changing.  I won a free lucky dip then won a free lucky dip with my free lucky dip.

You’re a strange one SS

The lottery example conveniently forgets that you’ve had the benefit of a right to occupy throughout the term of the deal. If you compare the deal to renting - you pay a fixed rent for an indefinite right to live and some upside in the value - it sounds amazing 

The lottery example doesn't work for the reason that risky pointed out. I don't see how it can be saved. 

Yasssss 🙌

Risky will be dining out on this for weeks.

Is that a first risky?

I bought a euro millions ticket by cashing in the £2.40 winner from Friday, and adding just 10p.  So there.