Published 01 May 2015
Moving Up the Ladder with Staircasing
- Staircasing is an excellent opportunity to make the most of your investment by purchasing more shares in your home, the greater the percentage you own the less rent you’ll pay to the association, and the more you can make on your investment.
Here at Hillcrest Property Solutions we always encourage responsible purchasing and we are here to offer guidance and financial advice should you look at the possibility of staircasing or indeed wish to staircase.
Benefits of Staircasing
Purchasing a greater proportion of your Shared Ownership home has numerous benefits:
- The greater percentage you own, the more profit you can make from any increase in the value of your home and thus on the share you own. Should you own 100% you will get back the full amount of any profit on the current market value when you come to sell your home
- Becoming the outright owner allows you to maximise the profit from any major home improvements you make during the course of being a leaseholder
- Your rent will reduce when you purchase further shares
- If you staircase and own your property outright, you can sell your home on the open market without consultation of the housing restrictions or indeed any restrictions that may apply in the lease, unless you have a key worker lease, where usually the property must be sold to a key worker according to the agreement
Different types of leases can affect staircasing:
Staircasing when you bought your lease before 1st April 2006
- Leaseholders of a New Build HomeBuy (Shared Ownership) property may acquire the entire interest in their property in a maximum of four steps, including the purchase of the original equity share
- Staircasing cannot take place in the first twelve months after the initial purchase.
- For subsequent owners, (as in the case of a resale) staircasing can only take place after three months
- The leaseholder must purchase a minimum additional 20% share 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%
Staircasing when you bought your lease after 1st April 2006
- Leaseholders of a New Build HomeBuy (Shared Ownership) property have no limit on the number of staircasing transactions
- Staircasing can take place any time after the initial purchase subject to affordability
- For subsequent owners, (as in the case of a resale) there is no three month restriction rule 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%
Key requirements for all leases
- The additional equity purchased will be based on the current market value of the property at the time of application to staircase
- The valuation must be carried out by an independent RICS (Registered Institute of Chartered Surveyors) qualified surveyor with the valuation accompanied with at least three comparable property values
- The leaseholder is required to meet the valuation costs and any other costs incurred in connection with the staircasing transaction, i.e. legal fees, mortgage arrangement fees, additional valuations in the case of surveyor disputes or expired valuation reports
- The leaseholder must pay any arrears of rent, service charge or other charges incurred prior to completion of the staircasing transaction
- In some cases your lease may restrict you from selling your property for three months following final staircasing.
What is on offer?
Most banks and building societies will offer free conveyancing on basic parts of the purchase i.e. any change of the mortgage lenders details registered against the property, as well as free valuation or indeed both to clients looking to place remortgage business to them. When staircasing, it may be considered by lenders as a form of re-mortgaging and most will offer these incentives to encourage borrowers to move from one lender to another. Leaseholders shall still be required to pay for a RICS qualified surveyor to conduct an appraisal prior to sale on behalf of leaseholder and the Housing Association and broker fees may apply. Speak to your mortgage broker for more information.
For more information about staircasing, download our handy guide.
If you wish to speak to a member of our team about staircasing, send an email to email@example.com