How to become a Shared Ownership Buyer
There are some general requirements that must be met in becoming a shared owner, apart from legal criterion like age, there are other eligibility criteria that must be met. The intending shared owner should be a first-time buyer, which implies he doesn’t already own a home or if he does, he must be trying to move or be in the process of selling it.
Since Housing Associations usually provide low-cost social housing for people unable to afford a home, the potential shared owner must not be able to afford a home suitable for his housing needs on the open market.
Your annual household income must be less than £80,000 and combined annual household income must be less than £90,000.
Types of Shared Ownership Schemes
There is a specialist shared ownership schemes for older people (55 and above) called OLDER PEOPLE’S SHARED OWNERSHIP SCHEME (OPSO)and a separate scheme with long-term disabilities called HOME OWNERSHIP FOR PEOPLE WITH LONG-TERM DISABILITY (HOLD). These two schemes come with special offers for those who fall under it.
Your credit file is important
Housing Associations want to help you get on the property ladder so the intending shared owner must be able to demonstrate a good credit history (no bad debts or County Court judgments) and are able to afford the regular payments and costs involved in running a home.
Staircasing can help you own 100% of your Shared Ownership Home.
Buying more shares in your home
If you own a shared ownership property, you probably would like to buy more shares from the housing association holding the remaining shares, if you can. As it turns out, this is possible and it’s what the staircasing process is all about.
Leaseholders of shared ownership properties are eligible to purchase further shares to increase their shares/equity in the property they co-own. The procedure guiding this process is outlined in the lease and is pretty much straightforward.
How the Staircasing Process Works
To start the process, a valuation will have to be carried out on the property which will determine how much you’ll have to pay for whatever increment you’re going for.
Staircasing valuations are determined by an appointed RICS Registered Valuer.
Leaseholders can purchase further shares in tranches or blocks of 10%. But because the process would usually incur significant legal and valuation fees, it’s always better to buy as much as you can at any time.
There are two types of staircasing, known as the interim and final staircasing processes. While interim staircasing involves buying further tranches of 10% or more, final staircasing involves buying all the remaining shares so you can own the property 100%.
If you staircase to 100% on a house, the freehold will be automatically transferred to you. This does not apply to flats. In this case, the property will still be leasehold and you’ll still have to continue paying service charges. The major benefit here is that you’ll no longer have to pay rent to the housing association.
Percentages that you can purchase
Different housing associations may have slightly different rules for staircasing. In most cases, however, the minimum you can purchase at any time is 10%. Purchasing more than 10% is also generally acceptable so long as it’s in 5% increments.
While many housing associations only allow staircasing at most three times, some may allow shared owners to staircase one final time after the third time if the purchase would take your stakes to 100%.
The government announced proposals to make it possible for homeowners to staircase by a minimum of 1%. While the proposal is currently under review, possible changes to the current procedure may not take effect until 2020.
Paying for Staircasing
Payment for staircasing can be financed with personal savings or mortgage. If you are financing this with a mortgage, you’ll either want to get a further advance from your current lender or you may want to remortgage, using a new lender.
You may need to seek the approval of your housing association for the mortgage for interim staircasing. Additionally, the amount to be borrowed may not exceed the amount needed to pay for the additional shares you want to purchase.
If however, you’re buying all the remaining shares as in the case of final staircasing, you won’t need the approval of your housing association for the mortgage and you’re free to borrow as much as you please.
You must not have any mortgage or rent arrears if you choose to staircase up.
Benefits of Staircasing
Although you don’t have to staircase if you don’t want, there are many benefits you stand to gain if you choose to do this. These include;
- Helping you climb the property ladder quicker;
- Increased shares will reduce payable rent;
- Ability to sell at any time (you stand to benefit if the property value increases);
- More control and ability to do anything with the property when you staircase to 100%.
Staircasing will help you own more or all of your shared ownership property. While there are enough good reasons to do this, you still have to tick all of the boxes in the right places.
You’ll have to contact your housing association and check your lease to see what’s involved. It also helps to get an idea of formal valuations and remortgaging beforehand. That way, you’ll be better prepared and the process will be less challenging.
Ready to staircase?
Contact an RICS approved surveyor to get your valuation.