People who cant afford for an outright mortgage on a property can opt to buy a proportion(25%- 75%) of the property through a shared ownership mortgage and pay rent on the remaining to the housing association or property developer who owns the building.
To be eligible for a shared ownership mortgage you will need to be eligible for the shared ownership scheme.
In most cases, after you have lived in the home for a minimum period of time (as stated in your agreement) you can then purchase more shares of the property(usually in 10% increments) using a shared ownership mortgage or staircasing mortgage.
This will allow you to own more of the property and pay less rent consequently.
The process of increasing your ownership in a shared ownership property is called “staircasing” and is usually only allowed 3 times on a shared ownership property.
It’s always a good idea to consult legal assistance before attempting to staircase so you fully understand your rights and can plan acordingly.
When you buy a shared ownership property initially you will need a shared ownership mortgage for the proportion of the property you buy.
In most cases You will need a 5% mortgage deposit rather than the 20% required for typical mortgages.
- Kent Reliance
- Leeds Building Society
As shared ownership mortgages are a bit of a speciality you should use a mortgage broker with some idea and experience of processing shared ownership mortgages.
Staircasing will usually depend on the lease agreement you have with your property developer or housing association.
A staircase mortgage is the mortgage you take when you want to buy more of your property after your initial shared ownership mortgage.
• Shared owners may purchase the entire property with a maximum of 4 steps including the initial purchase. This means you can only staircase on a maximum of 3 occasions to acquire the whole property.
• The valuation carried out on a property will be valid for 3 months and must be carried out by a RICS(Royal Institute of Chartered Surveyors) personnel approved by the property developer or housing association. The report must also be accompanied by two comparable property valuations.
• Any additional equity purchase must be at the current market value of the property when purchased.
• The shared owner must pay any rent or service charge owed during and up until completion of the staircase.
• The valuation costs, legal fees and any mortgage fees including those brought about as a result of the developer or housing association disputing the valuation report will be the responsibility of the shared owner.
• The conditions surrounding the staircasing will depend on the terms of the lease.
• The leaseholder is required to buy a further share of a minimum of 10% and in multiples of at least 5% above this percentage except in the third and final share which would take the shared owner’s equity up to 100%.
The rent being paid whilst on a shared ownership is subsidised(& much lower than rental rates) and therefore creates an interesting alternative in comparison to just renting outright.
• Shared ownership allows you to become a 100% owner there allowing you to benefit on any house price increases.
• By staircasing you reduce the amount of rent you have to pay.
• If you own your property outright you can sell your property at any time and to anyone rather to those who need to be approved and registered for the scheme.
• If you sell your home you will get to take a higher proportion of any increase in its value
How do I get an application form?
Your landlord will send you the application form which you will fill and return to them.
Pay the valuation fee after which your landlord will send a RICS surveyor to your home to inspect the property and provide a valuation with comparable properties.(valuation lasts for 3 months)
Once the purchase is complete your landlord will send you your new costs
What happens to my current mortgage?
If you have a current mortgage you can simply ask for a further advance or you can get a new mortgage with a new lender..so a remortgage.
Yes, a solicitor will be needed to assess your new lease.
Will home improvements made to my home by me increase the valuation when I staircase?
Any improvements you make will not be taken into account for the valuation.