Shared “Appreciation” Mortgages

Shared “Appreciation” Mortgages

Shared “Appreciation” Mortgages

Castle Trust and the Mill Group are launching innovative new property ownership schemes according to The Sunday Times. Essentially they are looking at the financial rewards to be made by funding the deposit for UK buyers.

This is not a new concept – Bank of Scotland and Barclays offered something similar in the mid 1990s. Essentially the company adds to the buyers deposit to enable them to get onto the property ladder. In return they take a considerable share to the appreciation in the value of the property over time, but have considerably less risk should the property value fall.

The Sunday Times reporters weren’t that complimentary. They have missed the point. Saving a 40% deposit is impossible. If you do not have it, you do not have it. This sort of scheme offers a fantastic opportunity for the right buyer.

For example look at Shared Equity schemes. Typically a key worker, say, a teacher or nurse buys 75% of a property, the scheme owns the rest. Capital appreciation is shared. Ask anyone on these schemes over the last 10 years what they think.

So very interesting to see. However cautiously these schemes are launched, they do represent exactly the sort of innovation needed as the economy pulls itself off the floor to enter yet another cycle.

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