Staircasing mortgage (A complete guide)

In this brief guide, we are going to define what a staircasing mortgage is and how to get one.

What is a staircasing mortgage?

A staircasing mortgage is a mortgage which allows those who own shared ownership properties to increase their ownership in the shared ownership property. You can use a staircasing mortgage to buy up to 100% of the shares in a shared ownership property.

What is staircasing?

Staircasing is the process of buying more shares in a shared ownership property.  You can buy up to 100% of the shares in a shared ownership property but each shared ownership provider will have its own terms on how much shares you can staircase by and how often you can staircase.

Ensure you check with your shared ownership provider before you begin the staircasing process and look for a staircasing mortgage.

By using a staircasing mortgage to increase your ownership in a shared ownership property you will reduce the amount of rent you have to pay on the property.

You should be aware that even though staircasing will help you reduce the amount of rent you need to pay it will also mean that your monthly costs will increase due to the monthly mortgage repayments on a staircasing mortgage.

Steps to take before you get staircasing mortgage

There are various steps you may need to take before you get a staircasing mortgage. They are listed below:

Contact your shared ownership landlord

You should contact your shared ownership landlord who will be able to tell you how much it would cost to staircase and the terms for staircasing. Your landlord will then value your home and let you know what the cost of the shares you want to buy is.

If you disagree with your landlord’s valuation you can get a district valuer to review it and provide a final valuation.

You should ensure you ask your shared ownership landlord what the terms of staircasing are and how many times you can staircase. This will ensure you don’t miss out on being able to staircase to 100% of the shares in the property.

At this stage, you may also want to get in contact with a shared ownership mortgage broker to determine what your staircasing mortgage options look like.

Get your staircasing funds ready

The next step you should take when considering a staircasing mortgage is to ensure you have the appropriate staircasing mortgage funds which you will use to buy the new shares in your property.

You can use any savings you have or borrow from your family( in which case you may need a gifted deposit letter).

There are two main ways to get the funds you need for a staircasing mortgage:

Get a further advance on your shared ownership mortgage

Remortgage your current shared ownership mortgage

A further advance

You may be able to get a further advance from your current shared ownership mortgage lender if your mortgage affordability has increased. Usually, you will need to have increased equity in your current shared ownership home for you to get a further advance but you may be able to get a further advance simply based on your mortgage affordability e.g if your income has increased.

Remortgage 

You may be able to remortgage your current shared ownership mortgage to a better rate and also get a bigger mortgage to pay off your current shared ownership mortgage.

This will essentially give you the funds you need to use for your staircasing mortgage.  You will still need to pass the mortgage lenders shared ownership mortgage affordability checks.

Benefits of a staircasing mortgage

A staircasing mortgage is a very good way to increase the shares you own in a shared ownership property and it allows many people to get on the property ladder and increases the shares they own in a property with little down payments.

Using a staircasing mortgage will allow you to benefit from any rise in property price.

A staircasing mortgage could also help you reduce the amount you spend on renting which may be seen as a lost cause in comparison to buying equity in your home with every monthly mortgage repayment.  Renting may also be a more expensive option than a staircasing mortgage.

Disadvantages of a staircasing mortgage

There are not many mortgage lenders who offer a staircasing mortgage and hence the staircasing mortgage rates you may see may not be very competitive.

Due to the fact that you may have to use a staircasing mortgage more than once, the mortgage fees could really rack up when you add up all the mortgage fees incurred every time you have used a staircasing mortgage to buy more shares on your shared ownership property.

A staircasing mortgage will usually have other fees associated with staircasing such as stamp duty costs, mortgage valuation costs, etc

A staircasing mortgage is good but if the shared ownership property price has risen then you will usually have to pay more to own new shares and this means a bigger staircasing mortgage.

You will usually need to staircase to 100% before you can extend the lease on a shared ownership property as they are leasehold properties.

As shared ownership properties are leasehold properties you may also have to continue paying for service charges and ground rent.  You will also never own the freehold of the property even if you use a staircasing mortgage and staircase to 100%.

What are the stamp duty charges when purchasing a shared ownership property?

When purchasing a shared ownership property you will have to pay stamp duty at the same rates as everyone.

The only difference is that you will only pay stamp duty on the portion of the property you purchase.

The Government website states “ When you buy a share in a property through an approved shared ownership scheme, you may have to pay SDLT. There are 2 ways to pay:

• make a one-off payment based on the total market value of the property
• pay any SDLT due in stages

If you decide to make a one-off payment upfront, this is making a ‘market value election’ for SDLT.

If you choose to pay SDLT in stages, you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.

You can choose which option’s best for you, depending on your circumstances.

 “.

You may want to contact a shared ownership conveyancer who can assist you in deciding which method of stamp duty payment may be best for you.

Staircasing mortgage calculator

You may want to use a staircasing mortgage calculator to see how your monthly payments could change by staircasing.

A staircasing mortgage calculator may provide you with the rental payment change and what your proposed monthly mortgage repayments could look like.

You should note, the results from this calculator are just for guidance only.

FAQs: Staircasing mortgage

Use a Staircasing mortgage broker

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

They will then go on to get you a mortgage offer and then help you complete on your staircasing mortgage.

In this brief guide, we defined what a staircasing mortgage is and how to get one.

If you have any questions or comments please let us know.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.