Everyone wants to own a home of their own one day, and Shared Ownership is an excellent starting point. However, the journey doesn’t stop there! Once you have owned your Shared Ownership home for a certain amount of time, you will then be given the opportunity to buy more equity in your home by ‘Staircasing’.
Wondering how Shared Ownership can transition into full home ownership? Check out our step-by-step guide to Staircasing:
What is Staircasing?
Staircasing is a process where you buy more shares in your Shared Ownership home on a step-by-step basis - hence the term Staircasing.
For example, if you own 20% of your Shared Ownership property, you can then buy another 20% share, taking your ownership up to 40%.
In some cases, you may have to own your home for up to 1-2 years before you have the option to Staircase your property.
Benefits of Staircasing
Giving you the chance to increase your stake in your property, Staircasing is an attractive option for many reasons. Here are some of the key perks of Staircasing your Shared Ownership home:
You’ll pay less rent
The biggest advantage of Staircasing is that you reduce the amount of rent you pay in the long-run. Buy more shares in your property, and your monthly rent bill will start looking a lot lighter, depending on what percentage you own.
You can sell a greater value of your home
Should you one day wish to move home, Staircasing makes the selling process much smoother. After all - the more of the property you own, the more money you can get from selling. If you own a share of your home, you can only sell on to buyers who pass the eligibility requirements of Shared Ownership. However, once you own 100% of your home, you will have full freedom to sell it on the open market!
You’ll be one step closer to full home ownership
While Shared Ownership gives you an affordable route to the property ladder, Staircasing brings you closer to your dream of full home-ownership. Free from your obligations as a tenant, you’ll be granted greater security, while reaping the benefits of your property’s rising value.
How to Staircase in Shared Ownership
Before you can enjoy the benefits of your new shares, you have to inform your housing provider of your intentions.
You’ll need to consult an Independent Surveyor, who can give you an up-to-date valuation of your property, and give you an idea of what share you can afford.
With your finances all in order, you then need to complete a Staircasing Enquiry Form for your housing provider to review.
How much does it cost to Staircase in Shared Ownership?
Usually, it costs around £2,000 to buy an additional share of your property. However, there are other costs that you should consider before you commit to buying more shares.
This could include paying for surveys, legal fees, mortgage fees and even stamp duty (depending on the value of your share!). Whatever you do, don’t go through the Staircasing process without assessing your finances!
For example of costs, let’s look at a 1-bedroom apartment at KEWB:
- Full market value: £427,500
- Current share owned (25%): £106,875
- Monthly rent on the unowned share: £735
- Monthly mortgage: £521
- Monthly service charge: £219
If you decided to Staircase by purchasing an additional 10%, here’s how it could look:
- Calculate 10% of the full market value:
10% of £427,500 = £42,750 - Add typical Staircasing costs:
- Valuation fee
- Legal fees
- Mortgage arrangement fees (if applicable)
- Potential stamp duty (depending on share size)
These usually total around £2,000. - Total cost of Staircasing 10%:
£42,750 + approximately £2,000 = £44,750
Is Staircasing worth it?
If your financial circumstances allow it, Staircasing your Shared Ownership home can be very beneficial.
As well as bringing yourself closer to 100% ownership, you’ll pay less rent, and sometimes make it easier to sell your property in the future.
As long as you are aware of the various costs, Staircasing is a logical next step to full home ownership.
However, you also don’t need to feel obligated to buy more shares - the choice is yours. For more information, you can read our article about whether Staircasing is worth it.
Types of Staircasing
Intermediate Staircasing
This is the purchase of a share that increases the amount owned, but not to 100% (e.g. Staircasing from 50% to 75%). After intermediate Staircasing the owner will still be known as a 'shared owner.'
A valuation is carried out and the price payable for the share is based on the value of the property. Once the share has been bought there is a corresponding reduction in the amount of rent paid to the housing association, as you only pay rent on the share you do not own.
Final Staircasing
Once the final share has been purchased, the owner will own 100% of the property and will no longer be a shared owner.
If the property is a house then the former shared owner will become the owner of a freehold property. If the property is a flat, it will still be leasehold which means that service charges continue to be payable.
However, there is no longer any rent to be paid to the housing association, although in some cases you may still need to pay ground rent. When you own 100% of the flat, the terms of your lease will change and it will no longer be a 'Shared Ownership' lease.
As with intermediate Staircasing, the price paid for buying all shares is based on the current market value of the property assessed by a valuer.
How do I pay for my Staircasing?
If you want to buy more shares in your home, the additional share can be bought either with your savings or with the assistance of a mortgage.
If paying for it with a mortgage, then this may be either by further advance from your existing lender or a re-mortgage e.g. a new loan from another lender.
In the case of an interim Staircasing, the mortgage offer must be approved by the housing association and the additional borrowing must be no more than the amount being paid for the additional share.
With a final Staircasing, the mortgage does not have to be approved by the housing association and no rules are limiting the amount you can borrow.
However, each situation is different so we advise speaking to a solicitor and mortgage advisor who has experience in Staircasing.
Stamp Duty Land Tax on Staircasing
Stamp Duty Land Tax (SDLT) is not payable on intermediate Staircasing unless the percentage owned is over 80%, in which case the transaction is treated for tax purposes as though it were a final Staircasing.
For a final Staircasing transaction, the SDLT premiums paid for the initial share, any intermediate shares and the final share are added together to determine the rate of tax payable on the final share. Duty is then paid at the applicable rate proportionate to the amount being paid for the final share.
However, please speak to a solicitor who can advise further on your specific situation.
If you're thinking about owning more of your home through Staircasing, please contact us today.
Frequently asked questions about Staircasing
Most buyers can Staircase at any time but some housing associations require you to wait 1 - 2 years before purchasing additional shares. Your lease will outline any minimum ownership period, so always check your agreement first.
The minimum additional share you can buy with Peabody is 5%. The exact minimum will be stated in your lease and confirmed by your housing provider.
Yes. Your rent decreases because you now pay rent only on the portion you don’t own. Your mortgage may increase if you borrow more to purchase the extra share. Service charges remain the same, and if you reach 100% ownership you will no longer pay rent.
