STEPHANIE and her husband own a house worth £700,000. They bought it a few years ago for £370,000 and have an interest-only mortgage for £81,000. They are paying £350 a month and the fixed term ends in June. As they are nearing retirement age, they would like to get rid of this mortgage and release some of the equity in the property for personal use. In the 1990s they had a SAM (Shared Appreciation Mortgage) with Barclays. They found it an excellent type of mortgage and would like to find something similar. They have looked into home reversion schemes, but were not impressed. They are also wary of equity release schemes. Are SAMs still available and, if not, is there another option?

James Cotton, of London & Country Mortgages, says: It’s interesting to hear Stephanie and her husband describe their Shared Appreciation Mortgage as excellent, because for many people they have proved to be something of a disaster.

SAM schemes, offered by Barclays and Bank of Scotland in the 1990s, enabled borrowers to release equity from their home by offering them an interest-free loan. In return, homeowners would hand over a substantial slice of the future growth in the property’s price to the bank (typically a three-to-one share in favour of the bank). Of course, property prices have rocketed since then, leaving SAM holders owing sums to the bank that far outweigh their initial loan.

It sounds as if Stephanie and her husband got rid of their SAM some time ago, and importantly before property prices really took off, hence their opinion of them. Partly because of the furore surrounding these mortgages, they are no longer available, so the couple will have to consider another option.

There are several alternatives. For example, they could consider using any cash savings they may have or possibly selling their home and downsizing. Although they are retired, there is nothing stopping them getting a new standard mortgage provided that they have sufficient pension income to increase their borrowing. They could remortgage in June, when their current fixed rate ends, and raise capital in this way. However, doing so will also increase their monthly mortgage payments, so it might not meet their objectives.

This leads us to equity release. This is a costly option, but it would allow them to release equity without having to make monthly mortgage payments. There are two types of equity release scheme: lifetime mortgages and home reversion plans. With a lifetime mortgage, interest is charged on the loan, but it is rolled up rather than paid each month. The debt is then paid on death or when the property is sold.

A home reversion plan works by selling part or all of the property to the plan provider in return for a cash lump sum. The customer can then continue to live in the property rent-free until they die or move into a care home, at which point the property is sold and the provider takes its share of the proceeds.

The minimum age for equity release schemes is typically 60, sometimes 65, so Stephanie and her husband are on the brink. This means that such a scheme might not seem like a good deal to them – for example, at their ages, they may be able to release only about 20 per cent of the value of the property with a lifetime mortgage (although in their case this is still a substantial amount).

Whichever option they choose, they are right not to rush in. I would recommend that they seek further specialist advice before proceeding any further.

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