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Staircasing

Staircasing

Shared ownership staircasing advice

20/04/2017

The United Kingdom's government is dedicated to creating more home ownership. This goal has spawned a few scheme to help people with different backgrounds, low-income and disabilities. Shared ownership is one of those programmes that help individuals with low income to own a portion of the house which is between 25-75% of the total property. The scheme also allows shared ownership individuals to increase their share of the property with a method called staircasing. Allowing shared ownership of the property to complete ownership increases enthusiasm among buyers. Here’s some staircasing advice you should consider.

Shared ownership is shared with a housing association. The partial ownership share to some extent limits your control over the property and operation. The housing association is responsible for major modifications and before you need any special adjustment on the property. In staircasing, if you increase your ownership from 10 percent to under 100 percent then it is called partial staircasing. If you want to increase your ownership to 100 percent, it is known as full staircasing. To go ahead with staircasing, a minimum of 10 to 20 percent increase is required until the final staircasing for 100 percent.

The process of staircasing is less troublesome and faster than conveyancing for obtaining shared ownership. Still, that can be daunting for someone inexperienced with legal responsibilities. The process of staircasing normally includes the following process:

  • Dealing with the appropriate Housing Association
  • Getting a valuation of the property
  • Contacting with the mortgage lenders
  • Completion of Memorandum of Staircasing

Dealing with the relevant Housing Association

The housing association is responsible for renting the share of the property you do not own. You have to buy additional shares of property until you reach 100 percent ownership. The process includes contacting the housing association to allow you own an increased share of the property. The process can be made efficient with the help of an experienced solicitor. Their staircasing advice can speed up the process and help with legal aspects of the process.

Getting a valuation of the Property

When you need to increase your share, you have to consult the RICS for valuation. An RICS surveyor will valuate the current cost of the property. Moreover, the amount is divided by the percentage of the property you decide on increasing ownership. The housing association can appoint a surveyor, but you have to finance the operation.

The valuation cost is considered valid for three months, so the staircasing should complete within this period. Failure to complete staircasing within the period will require a new assessment.

Contacting with the mortgage lenders

If you are obtaining a mortgage for staircasing or remortgaging the property, it is important to complete mortgage deal. This is going to finance the staircasing of the property. It always helps to have a good credit rating for a speedy mortgage approval.

Completion of Memorandum of Staircasing

If you are acquiring an additional share of the property and not the complete share of the property, the housing association will send you the Memorandum of staircasing. This is done after the payment for the share is complete. You have to sign this document, and it is registered with the Land Registry. If you have appointed a solicitor, they will handle the Memorandum of Staircasing for you.

Are there any Shared ownership risks

24/03/2017

Shared ownership enables low-income earners to get homes at reduces prices. All they have to do is pay between 25% to 75% of the price of the house. The rest of the cost of the house is catered for by a financial institution. The buyer must then pay a rent to the financial institution with which he enters a shared ownership scheme with.  The percentage of the shares held by buyers are normally paid for by a mortgage and lender. This money does not come from the buyers own pockets. They buyer may increase his shares of the property by staircasing. Staircasing involves the gradual purchase of the shares that are owned by a financial institution until the time that a buyer owns 100% of the property. He may then seize to pay rent to the financial institution. All these facts about shared ownership make the scheme seem very appealing. However, there are shared ownership risks that a buyer must be prepared for before entering into the scheme.

The Staircasing process

Staircasing your way into full home ownership is not easy. A buyer has to pay some money for every share he buys. Shared ownership is for low-income earners and is mostly funded by mortgages. This implies that a buyer of a shared ownership property may not have enough money to buy the shares of a housing association. This is because this buyer has the financial obligations to the house which include payment of rent and mortgages. He may be so financial constrained that he will never be able to buy all the shares of the property. Cases have been documented of buyers staying in shared ownership for the rest of their lives rather than taking advantage of staircasing. Staircasing can only be possible if the buyer gets an increase in his incomes.

Failure to pay regular rent for unowned portion of the house

Shared ownerships are very much like rented properties. A buyer must pay rent to the housing association or financial institution with which he enters into tenancy with. The rent is usually 3% of the shares held by a housing association. A buyer must also make a monthly instalment of mortgages If he bought the house through a mortgage. These expenditures are made on a regular basis. A buyer who fails to make rent payments may lose his property in the long run. Mortgage lenders chip-in to rescue buyers with mortgage arrears. Even so, the buyer must repay the lender the amount of money that was used to foot his rent arrears.

Maintenance costs

Maintenance costs of shared ownerships are divided between a buyer and his financial institution. This is one of the ways that shared ownerships is similar to assured tenancy schemes. The proportion of the cost of maintenance can rise steeply if major repairs are to be undertaken. Buyers who have flats owned by freeholders rather than housing associations are even at a greater risk of paying more for maintenance. This is because they are viewed as tenants by their freeholders and are not seen as shared ownership partners. 

One must consider these shared ownership risks by any buyer that is considering entering into the scheme. Although they are not high risk, they inevitably can cause you unwanted trouble during your stay. Reviewing these risks help you make a better decision for getting the most benefit out of shared ownership houses.