Mortgage process when 'staircasing' a Shared Ownership home?
If you have bought your home using a Shared Ownership scheme then there may come a time when you want to buy a greater share of your property.
Buying further shares of your home is called 'staircasing' and you can do this to:
- Increase the proportion of your home that you own
- Reduce the rent that you are paying
When you come to sell your home, if you own a greater percentage then the more profit you will make if the value of your property has increased.
If you need a mortgage to 'staircase', our guide tells you everything you need to know.
The 'staircasing' process
If you decide you want to increase your share in your home you should normally contact the 'landlord'. In the case of Shared Ownership, this is the housing association. You should also speak to a mortgage broker or to your lender about borrowing the money that you need to buy the additional share. There are normally two ways of raising the funds to buy an additional share in your home:
1. A further advance
Your existing mortgage lender may be able to advance the money you need to staircase. They will need to value your home to establish that there is sufficient equity and you will normally have to pay the valuation fee.
They are likely to want to see proof of your earnings in order to conduct an affordability assessment and to ensure that you can meet your total repayments.
They may also offer you a fixed- or variable-rate deal on the further advance.
If you need to borrow extra money to fund the staircasing you may want to consider moving your mortgage to another lender. A remortgage allows you apply for a larger loan with a new lender, meaning you can repay the mortgage to your existing lender and have enough cash to pay for the additional share.
Many lenders have excellent fixed- and variable-rate deals for remortgage borrowers. Some even offer a 'remortgage package' where they will meet the valuation and legal fees involved in the remortgage.
The pros and cons of a further advance
Approaching your existing lender for a further advance is likely to be easier in terms of paperwork and getting the money. You don't have to go through a brand new application process from scratch and there are rarely any legal issues to resolve. They may also look more favourably on your application as you have a track record of making repayments to them.
A further advance may also be worth considering if you already have a fixed-/variable-rate deal on your main mortgage. If you have to pay significant early repayment charges for coming out of your mortgage, then switching to another lender may cost you thousands of pounds.
The pros and cons of a remortgage
Remortgage rates are often more competitive than those offered on a further advance. You will be able to benefit from a fixed/variable deal not only on the additional amount that you borrow but also on your main mortgage.
A remortgage can take some time to complete, however, as you have to go through the mortgage process from the beginning. You will also have additional paperwork to deal with as there will be solicitors involved in the remortgage process.
Once your mortgage/further advance is agreed
Once the money has been released, you can then purchase the additional share of your home. You'll make a single mortgage payment to your lender and the amount of rent that you pay will be adjusted accordingly.
Most leases allow you to buy in multiples of 5% with a minimum purchase of 10%. This means that you can staircase on more than one occasion - typically up to three times - in order to increase the proportion of your home that you own.