How to staircase shared ownership
Shared ownership is becoming an increasingly popular option for those looking to get a foot on the property ladder. It offers the opportunity to purchase a share in a property, with the option to buy more shares in the future.
Staircasing, as it is commonly referred to, allows individuals to gradually increase their share in the property, ultimately leading to full ownership. This can be a great way to build equity and eventually own your home outright.
But how exactly does one go about staircasing shared ownership? In this article, we will explore the steps involved and provide some helpful tips along the way.
Understanding shared ownership
Shared ownership is a type of housing scheme that allows individuals to part-buy and part-rent a property. It is aimed at people who cannot afford to buy a home outright but want to take their first steps onto the property ladder.
Under a shared ownership scheme, buyers purchase a share of the property which is usually between 25% and 75%. The remaining share is owned by a housing association or a private developer, who then charges rent on the share that they own. This enables individuals to buy a property with a smaller deposit and access to a mortgage for the portion that they own.
Advantages of shared ownership:
- Lower upfront costs: Since buyers are only purchasing a share of the property, the deposit and mortgage required are significantly smaller compared to buying the property outright.
- Incremental ownership: Shared ownership allows individuals to gradually increase their ownership share over time. Buyers can staircase (increase) their share, usually in increments of 10%, until they own the property outright.
- Opportunity to build equity: As the buyer increases their share in the property, they also gain any increase in the property’s value, allowing them to benefit from any potential appreciation.
Considerations for shared ownership:
- Additional costs: It’s important to consider additional costs such as mortgage fees, solicitor fees, and service charges associated with owning a shared ownership property.
- Resale restrictions: Most shared ownership schemes have restrictions on selling the property. If you decide to sell, the housing association or developer has the option to buy back the property first.
- Eligibility criteria: Shared ownership schemes have specific eligibility criteria such as income caps, residency requirements, and being a first-time buyer.
- Management and maintenance: The property may be managed by a housing association or developer, which means you may have fewer responsibilities for maintenance but also less control over certain aspects of the property.
Overall, shared ownership offers a viable path to homeownership for individuals who may not be able to afford to buy a property outright. By understanding the advantages and considerations of shared ownership, potential buyers can make informed decisions about whether this is the right option for them.
Benefits of staircasing
Staircasing can offer a range of benefits for shared ownership homeowners:
- Increased Ownership: As you staircase, you increase your ownership share in your property. This can provide a sense of security and pride as you work towards owning 100% of your home.
- Higher Equity: With each additional share purchased, the equity in your property increases. This can be beneficial if you ever decide to sell your home, as a higher equity stake may result in a greater return on investment.
- Reduced Rent: As you staircase and own a larger share of the property, your rent payments will decrease. This can lead to more affordable housing costs and potentially save you money in the long run.
- Freedom to Sell: Once you own 100% of your property, you have the freedom to sell it on the open market without any restrictions. This can provide greater flexibility and control over your housing situation.
- Ability to Reinvest: If you decide to sell your shared ownership property, the funds you receive from the sale can be reinvested into purchasing a larger property, upgrading your current home, or using the money in any other way that suits your financial goals and needs.
- Financial Stability: By staircasing and owning a larger share of your home, you can have increased financial stability and control over your living situation. This can help provide a solid foundation for building wealth and planning for the future.
Staircasing can offer numerous advantages, both from a financial standpoint and in terms of homeownership. It’s a way to steadily increase your ownership share in your shared ownership property, providing greater security, control, and potential financial benefits.
How to start the staircasing process
To start the staircasing process, you should first review the terms and conditions of your shared ownership agreement. It’s important to understand the rules and requirements for staircasing before proceeding.
Once you are familiar with the terms, the next step is to determine your eligibility for staircasing. Check if you meet the criteria set by your housing association and your mortgage lender.
If you meet the eligibility requirements, you should then contact your housing association to express your interest in staircasing. They will provide you with all the necessary information and guide you through the process.
1. Independent valuation
Before proceeding with staircasing, you will need to have an independent valuation of your property. This valuation will determine the current market value of your home and the amount you will need to pay to increase your share.
You should select a valuer who is registered with the Royal Institution of Chartered Surveyors (RICS) to ensure an accurate assessment.
2. Mortgage affordability assessment
Next, you will need to contact your mortgage lender or a financial advisor to assess your affordability for increasing your share. They will review your financial situation, including your income and expenses, to determine if you can comfortably afford the increased mortgage payments.
It’s important to note that you may need to remortgage or switch to another lender to secure financing for staircasing.
During this step, it’s also critical to consider any associated fees, such as legal fees, valuation fees, and any stamp duty or tax obligations.
Once you have completed these steps and have a clear understanding of the process, you can proceed with the staircasing process. It’s important to work closely with your housing association advisors and mortgage lender to ensure a smooth and successful transition.
Remember, staircasing can provide you with increased ownership and a pathway towards owning your home outright. It’s a significant financial decision, so make sure to carefully consider your options before proceeding.
Financing your staircasing
When it comes to financing your staircasing, there are several options available to you. Here are some common methods that you may consider:
Mortgage: This is one of the most popular options when it comes to financing your staircasing. You can apply for a mortgage from a bank or a mortgage lender to buy additional shares in your shared ownership property. This can help you increase your ownership percentage over time.
Savings: If you have been saving money for a while, you can use your savings to finance your staircasing. This can be a good option if you have a substantial amount of money saved up.
Re-mortgaging: If you already have a mortgage on your shared ownership property, you may be able to re-mortgage your home to finance your staircasing. This involves borrowing more money against the value of your property to buy additional shares.
Help to Buy: If you are eligible, you may be able to access the government’s Help to Buy scheme to finance your staircasing. This scheme provides an equity loan, which can be used to buy additional shares in your shared ownership property.
Shared ownership loan: Some housing associations offer shared ownership loans to help their residents finance their staircasing. These loans can be used to buy additional shares and are repaid over a fixed term.
It’s important to carefully consider your options and speak with a financial advisor before deciding on the best method to finance your staircasing. They can help you assess your financial situation and advise you on the most suitable option for your circumstances.
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Steps to complete staircasing
Step 1: Assess your financial ability
Before starting the process of staircasing, it is important to assess your current financial situation. This includes evaluating your income, expenses, and savings to determine if you can afford to increase your share in the shared ownership property.
Step 2: Contact your mortgage lender
Once you have determined your financial ability, get in touch with your mortgage lender to discuss your intention to staircase. They will provide you with information and advice on how to proceed.
Step 3: Arrange a valuation
After contacting your mortgage lender, you will need to arrange for a valuation of the property to determine its current market value. This valuation will help determine the cost of purchasing additional shares.
Step 4: Complete the necessary paperwork
Once you have the valuation report, you will need to complete the necessary paperwork to officially request to staircase. This paperwork may include an application form, financial statements, and proof of identity.
Step 5: Cover the costs
Before finalizing the staircasing process, you will need to make sure you have funds available to cover the costs involved. This may include legal fees, administration fees, and stamp duty if applicable.
Step 6: Ownership changes
Once all the paperwork and costs have been covered, your ownership share in the property will officially increase. You will need to obtain the necessary documents and agreements to reflect the new share of ownership.
Step 7: Notify relevant parties
Finally, make sure to notify the relevant parties such as your solicitor, mortgage lender, and relevant housing association or management company about the changes in ownership. They will update their records accordingly.
Following these steps will help ensure a smooth staircasing process and allow you to increase your share in a shared ownership property.
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