We take you through the process of increasing the share of your Shared Ownership new home and the implications for your mortgage…
A Shared Ownership property allows you to buy more shares in your home, a process that’s known as ‘staircasing’. Doing this is favourable for two main reasons.
- It increases the percentage of property you own
- It reduces the amount of rent you pay
In addition, if you decide to sell your home, the bigger proportion you have, the more money you could make. Here’s a short guide about how you can go about staircasing your property.
Staircasing: the options
The first thing you should do is contact your landlord which, with Shared Ownership, is usually your housing association. To borrow the money needed to buy an additional share in your property, you should also talk to your lender or a mortgage broker. Usually, there are two options you have to borrow the additional money:
1. Borrow more from your existing mortgage lender
Your current mortgage lender could lend you the additional money needed. This is known as a ‘further advance’. First of all, your lender would revalue your home to see if you’ve sufficient equity. You would usually have to pay a valuation fee for this. In order to make sure you could meet your repayments they would carry out an affordability assessment. If satisfied, they could then offer you a variable or fixed rate deal on the additional money borrowed.
You could consider moving your mortgage to a new lender. This would mean you could apply for a bigger loan which would allow you to pay your current mortgage to your present lender and with the additional money pay for the additional share of the property. You should look for lenders that will offer excellent variable and fixed-rate deals on remortgages. Some may even be prepared to pay valuation and legal fees as part of a ‘remortage package’.
The pros and cons of getting a further advance
Since you already have done business with your current lender and they know you, getting additional money could, in theory, be easier. There may also be less legal issues and paperwork as you don’t have to start from scratch going through a completely new application process. Your current lender will also know first-hand that you have a good record of meeting repayments on time.
However, you will be taking on more debt, which will be linked to your property. Also, the rate of interest you get may not be as good as elsewhere, if you shopped around. A new lender may give greater incentives to gain your custom as opposed to your current lender.
The pros and cons of remortgaging
You could possibly get those better interest rates than your current lender offers. You could also take advantage of a variable or fixed rate deal on your main mortgage as well as the additional money you’re borrowing. Nevertheless, remortgaging means going through the mortgage process again, almost from scratch. It could mean lots of paperwork and a significant amount of time to get through everything.
Once your finance is in place
Once your further advance or mortgage is agreed, then you have the means to buy the additional share in your Shared Ownership home. A single payment will be made by you to your landlord. Once this is done, your rent will be lowered accordingly.
You repeat this process each time you buy an additional share in your Shared Ownership home, usually in blocks of at least 10%. Once the full staircasing process is completed, you’ll own 100% of your new home.