What is Staircasing Mortgages?

Staircase Mortgages

In simple terms, staircasing is where those who are on a Shared Ownership mortgage have the opportunity to purchase a bigger share of their property when they can afford it. It means that if you, for example bought 50% of a property on a shared ownership mortgage, over time you can increase the share that you own in your property, until – if you wish – you have the full 100% ownership.

By purchasing a bigger share of your home you will reduce the amount of rent that you are paying – but of course are likely to increase the amount of mortgage repayments that you are making.

How to buy your way up to 100% of your property?

The process of buying a larger proportion of your property is a relatively simple one. Firstly you should make contact with your `landlord` – the entity which owns the other proportion of your property – usually a house builder or housing association. You should also get in touch with a mortgage broker – such as our team here at Just Mortgage Brokers to find out what your options are.

You will probably need to raise funds to be able to buy the extra portion of your home and there are generally two way to do this:

• A further advance – your mortgage lender might be willing to offer you a further advance. They will usually value your home to make sure that there is enough equity in it – which you may well have to pay for, as well as showing proof of earnings which will satisfy them that you can afford the repayments.
• Remortgaging – you might want to consider remortgaging to borrow the extra money for staircasing. Here you can apply for a bigger loan which you will use effectively to pay off the old one and buy the new part of your home.

To ascertain the amount that you will be required to pay to purchase any additional share of your home, you will need to have a qualified surveyor carry out a valuation. The up to date value will then be used to calculated the price you will need to pay.

The pros and cons of staircasing

There are a number of considerations which should be taken into account when you are thinking about applying for a Shared Ownership mortgage or intending to use the `staircasing` process.

Here are some of the pros and cons:

Pros – It can be a great way to get on the housing ladder, staircasing enables to you buy an increasingly large proportion of your property, you can sell your property whenever you want – and will benefit from any house price rises, it can often be less expensive than renting.

Cons – The price of shares in your home will follow the value – so if the value of your home increases, so will the price of your shares when you are looking to purchase, there will usually be other costs to pay such as the valuation fee and potential stamp duty.