If you bought your home through a shared ownership scheme, you might be wondering what your next steps are. If you plan to eventually own your home, staircasing is the way to do so.
Let’s take a look at what staircasing means, how it works, and how it could lead you to full ownership of your home.
What is shared ownership?
The shared ownership scheme was introduced to give first-time buyers and those who do not currently own a home an opportunity to buy a share in a new build or resale property.
You pay a mortgage of between 25% and 75% on your share in the house when you buy through a shared ownership scheme. You will also pay rent to a housing association on the remaining share.
Because your mortgage will only cover your share in the property, the amount of money required for a deposit will likely be lower than if you purchased the home outright. This allows buyers with a smaller deposit the chance to get on the property ladder.
Related: What is Shared Ownership?
Can you eventually own a shared ownership house?
If you’ve purchased a shared ownership home, you have the option to increase your share while you live in the property via a process known as ‘staircasing’. This is where you can buy additional shares in your home to increase your ownership percentage. Buying additional shares will also reduce the amount of rent you pay and can eventually lead to 100% ownership in some cases.
However, full ownership is not always possible as some housing providers limit the amount of shares you can buy. So, it’s important to check the terms of your lease.
How does staircasing work?
The process will depend on whether you bought the home under the original shared ownership scheme or under the new shared ownership model.
Staircasing if the home was purchased under the original scheme
If you wish to buy additional shares in your home after purchasing it under the original shared ownership scheme, you’ll first need to contact your housing provider and give notice that you plan to staircase.
The minimum share you will be eligible to buy is 10%, and you’ll need to arrange and pay for an independent surveyor to value the home. Once you’ve received your copy of the valuation, you can then confirm whether you would like to proceed with staircasing.
It’s important to note that most valuations are only valid for three months, so if you take longer than this to complete your application, your home may need another valuation. This is because shares are sold at their current market value, and not the price you originally paid for the home.
The new rules for staircasing a shared ownership home
If you bought your home under the new shared ownership model (introduced 1st April 2021), the minimum standard share you can purchase is now 5%. However, you may also have the option to staircase by 1% each year for 15 years from the date you bought the property, but you must contact your housing association to find out more about this first.
If you do decide to staircase by 1% each year, the price of your share will be based on the original market price of your home, increased or decreased in line with the HM Land Registry House Price Index.
Related: Your guide to understanding your property’s value
What are the benefits of staircasing?
More freedom when selling
If you don’t own 100% of the home and you wish to sell your share, your housing association will have a fixed period of time to find someone to buy your share before you can sell it yourself through an estate agent.
Owning 100% of the property means you may not need to wait for the housing association to find a buyer. However, you may still have to offer it back to them before it can be sold on the open market. So, make sure to check your lease.
Lower rent
Buying a larger share in your home means you will pay less monthly rent, but it should be noted that your mortgage repayments will increase instead.
Benefit from increase in house prices
The larger your share in your home, the more you will benefit if its value increases.
Greater mortgage choice
If you achieve 100% ownership of your home through staircasing, you will have access to a standard mortgage, rather than a shared ownership mortgage. The interest rates of a standard mortgage could be cheaper.
Security
Until you own 100% of the property, you will need to keep on top of rental payments. Otherwise, you could be at risk of losing your property and the money you’ve put into it.
Related: Four tips for saving your deposit
Restrictions
Check your lease as there may be limits on joint ownership staircasing in some buildings. One of these limitations may be an 80% staircasing cap. In rural areas, this kind of limitation is frequently present to guarantee that the land is kept for local use.
How much does staircasing a shared ownership home cost?
The cost of your additional shares will depend on your specific home. But on top of this figure, you’ll also need to budget for the additional costs. These may include:
- Surveys and valuations
- Staircasing solicitor fees
- Stamp Duty (depending on the value of the shares you’re buying)
- Mortgage fees if you’re remortgaging or extending your existing mortgage
Do I have to staircase?
You do not have to staircase your shared ownership home if you don’t want to or can’t afford to. There are many benefits to living in a shared ownership property without buying extra shares, and you can still build up equity without staircasing.
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