Staircasing – how to own more of your shared home

Staircasing – how to own more of your shared home

?You’ve bought your home under a shared ownership scheme. Now, over the course of a few years, staircasing lets you gradually own more and more of your property. Here, we look at the pros and cons of staircasing.

To buy a shared ownership scheme property, you need to be either a first-time buyer or someone who previously owned a home and cannot afford to buy one now. And your household income must be less than ￡80k, or under ￡90k if you live in London.

Shared ownership is also known as ‘part buy, part rent’. So, you literally buy a part of the property. You could buy as little as 25% of the property. For this example, let’s say 25%. Then the other 75% is rented to you.

You would normally need to put down a 5% deposit calculated on the 25% (or whatever the percentage is that you’re buying). Your rent is then calculated on up to 3% of the remaining share of the property – in this case, 75%. This usually works out more affordable than simply renting.

To start the shared ownership scheme, you need to find what properties are available near the area you want to live, you can start by searching for local housing associations or for properties directly, you can also find more information on how to buy a shared home here; this article focuses purely on staircasing once you’ve bought your Help to Buy home.

The staircasing process

Staircasing helps you to gradually increase your equity percentage in your shared ownership home. In other words, buy a bigger share of the property. In doing so, your rent reduces by the proportion that you staircase up.

Depending on the housing association you originally bought through, you normally have to buy a minimum of another 10% more (we understand that this could change to a minimum of 1%).

Be warned that many housing associations only allow up to three staircasing events, so if you want to eventually own 100% of the property, you need to be strategic.

The positives of staircasing

·????????Small deposit needed – this is usually only a 5% deposit of your share of the property’s value, not the average 20% mortgage deposit

·???????Reduced rent each time you staircase up

·????????The overall cost of mortgage and rent can be cheaper than just renting

·????????Shared ownership is a more secure form of renting with the added benefit of building up property equity?

·????????100% ownership gives you better security and the option to buy the freehold if available

·????????100% ownership means not paying any more rent (but you may still need to pay ground rent and service charges if it’s a leasehold property)

·????????100% ownership means you should be able to sell it on the open market depending on the lease

The downside of staircasing

·????????If you fall behind on your rent payments, you could potentially lose your property

·????????Depending on your lease, you may only be able to go through the staircase process three times to help you own 100% of your home, so plan carefully for this

·????????Full service charges will still apply for maintenance of communal areas, including roofs, even when you own 100% of your home (consider that this is normal practice when buying a leasehold property)

·????????The costs involved each time you want to staircase. You’ll need to pay for a RICS market valuation, solicitor’s fees and mortgage fees if you need a new mortgage

·????????You may also need to pay Stamp Duty once you’ve reached 80% ownership of the property. Here’s more information on paying SDLT.

·????????If you need to sell, and own less than 100% of your home, your housing association will need to find someone to buy your share from you

·????????Some housing associations won’t allow you to purchase the freehold even when you’ve bought 100% of the shares in the property

When to staircase

Make sure you have sufficient savings available first. You will also need to be up to date with all your rent payments, clearing any arrears. And you’ll need to arrange for a RICS shared ownership valuation, being a professional assessment of how much your property is worth.

Even if your housing association implies that you should choose your RICS valuer or surveyor from their ‘approved’ list, this is not compulsory. It’s always best to get a few quotes to ensure you get one of good value.

If you’ve made improvements to your home, the valuation should reflect that. Be aware, though, that your housing association will also need a valuation based on the property’s appearance when you first moved in. Naturally, most experienced RICS valuers, like us here at Morgan Sloane, are fully aware of this and will provide a secondary valuation that doesn’t include your home improvements.

Your valuation will include:

·????????Inspection of the property by a surveyor with local market knowledge

·????????Overview of the property, its construction, location and accommodation

·????????Overview of the property’s general condition

·????????Details of nearby properties that are similar to yours and that were sold within the time frame required by the housing association

·????????Valuation of the property, including a detailed description of the evidence and assumptions used

We’re here to help you own more of your home

On balance, we believe that staircasing is a very helpful step up onto the property ladder for first time buyers.

If you already have a home under a shared ownership scheme and have managed to save some funds, or your income has improved enough to increase your mortgage, you’re ready to take the next staircasing step. And now you know where to come to get your home professionally valued.

Do get in touch to book an appointment or to discuss your circumstances. Let us help you own more of your home.

Telephone 0800 161 5767 or email [email protected] for a friendly initial chat.