Shared ownership is a great way to get onto the property ladder.
From here, you can steadily start climbing the ladder…
This is where staircasing comes in.
You can find out what staircasing is and its pros and cons below.
What is staircasing?
Staircasing is a process most associated with ‘shared ownership’ in the UK.
It’s when you gradually increase the percentage of a property that you own.
For example, you may buy a shared ownership property at 25%. But if you build up more cash, you could then want to own more of it and pay rent on less.
Staircasing is helpful if your deposit isn’t huge or your income isn’t enormous.
Staircasing restrictions
Sometimes, there could be restrictions about how long after moving in you can staircase.
Other properties may have a cap (such as up to 80%). You should find this out before buying the property.
Is staircasing compulsory?
No, staircasing is not compulsory.
You should check your contract to be sure, but almost no housing associations make this a requirement for buying a property. It’s entirely up to you.
Just keep in mind that there are many benefits to staircasing.
So, doing so may be in your interest (see below).
How do I staircase?
When you buy a shared ownership property, you should check the lease. This should give direction on how you can buy more shares.
In most cases, you’ll need to get a surveyor to value your property. This will determine its value in the current market. You cover the cost of this.
You should pass the valuation onto your housing association. They’ll decide whether they agree with it.
Once you’ve settled on a value, they will tell you how much staircasing will cost. It’s up to you whether to proceed.
Staircasing costs
If you proceed with staircasing, the housing association will indicate how much it will cost. It’s thus useful to know the fees involved with this.
You typically need to pay for surveys and conveyancing fees. You must also pay the housing association’s fee for arranging the staircasing.
Stamp duty and mortgage fees may apply. This is common if you remortgage in the process of staircasing.
In many cases, these details cost several thousands of pounds. Speak to professionals near you for bespoke price quotations.
Do you need a solicitor for staircasing?
Yes, it is highly recommended that you get a solicitor for staircasing.
Unless you’re a qualified solicitor or have experience in this area, you’ll need someone to handle the paperwork.
This is essential due to it being a complicated process.
During staircasing, your solicitor will handle:
- Reviewing the lease
- Speaking to the housing association
- Transferring the funds
- Preparing the Memorandum of Staircasing
- Updating the lease
- Transferring the title
- Liaising with any other relevant third parties.
All of these steps need to be done. And you shouldn’t try it yourself without the expertise, experience and professional indemnity insurance.
After all, if something goes wrong, you need protection. Search for a trustworthy solicitor near you.
Details to find out when staircasing
You shouldn’t jump into staircasing too quickly. There are a few important details you must find out first.
First, find out if you can sell back your shares. This isn’t ideal but can be helpful if you have financial difficulties.
You should also review other details of your lease. Do this with a solicitor.
For instance, you need to know if staircasing has a minimum amount set by the housing association.
If you jointly own the property, you should liaise with the other people involved. Get clarity on what happens in various circumstances.
Examples include someone passing away or a person leaving the arrangement.
And make sure you get advice from a housing expert and solicitor too.
Advantages of staircasing
You should consider all the pros of staircasing. It could appeal to you in several scenarios.
Build equity in a house
A significant advantage of staircasing is that it enables you to build equity in a house.
This means that not all of your payment goes to rent. You’ll thus get this equity back if you ever sell it.
More affordable
Staircasing is helpful if you can’t afford to buy the entirety of the house up-front.
Instead of taking a risk, and putting yourself in a difficult financial situation, you can move slowly.
This ensures your financial foundations are strong and you don’t ‘bite off more than you can chew’.
Control
There’s a sense of pride in increasing your ownership of the house.
And it also means that you’ll have more control once you own 100% of it. This includes renovations or extensions.
Disadvantages of staircasing
Staircasing isn’t entirely positive. You should think about the downsides, too, before jumping in.
Strict requirements
Some housing associations have strict requirements around staircasing.
This could involve how often you can do it or the amount you must staircase by in one go.
This can limit your flexibility and thus make it less attractive.
Expensive
Staircasing is quite expensive, too.
You’ll continue to pay rent on the portion you don’t own, which you don’t get back.
And there’s extra fees involved with your solicitor and housing association.
Limited control
You have limited control over the property until you have 100% ownership.
You can often be stopped from extending it or making significant alterations.
How to reduce the cost of staircasing
Every time you staircase, you must pay a fee to your housing association.
As well as a solicitor. It’s thus often in your interest to staircase in larger chunks.
Make sure you get value for money with the solicitor you use.
Speak to several professionals before deciding. And check their online reviews to see if previous customers are satisfied.
You will sometimes have to pay early exit fees if you try to staircase before your mortgage term ends.
It’s important to time it right.
You should also get guidance on the best mortgage deals available.
This ensures you get the right deal, which doesn’t involve more interest than necessary.