Shared Ownership Question

Little_Bunny

Hello everyone,

Newbie here ... I know SO questions (in particular the downsides) have been done to death but i'm seriously considering it because I am trying to find a 2 bed near a tube preferably in zone 2 and just cannot find anything suitable. Not asking for anything special, def ex-LA, but even so they are going for around £320k+ and I got a MIP for only £280k as i'm a single person. So I am looking into SO as the location is great (no guarantee I will get it tho because a couple will be a higher priority than me) but im just looking into things before I make my final decision.

I would like to know does the housing association use their right of first refusal if I am lucky enough and able to staircase to 100% because if I ever do want to sell obviously i would want to sell it for the maximum i can to help me move onto hopefully a bigger property if i do have a family or just to go up the ladder. Has anyone done this before or did the HA try to find a buyer (they have the right technically for 21 years after staircasing to 100%!).

My only other question is please can someone explain the staircasing process and its pitfalls i.e. does it mean you have 2 mortgages? I read somewhere something like lenders will only lend on the share you own and not the value of the property ... maybe me being a dunce but what does that mean?!

Many thanks,

LB

Southend1

If you can afford a mortgage of £280k then you can definitely afford a flat at £320k. You just need to save your deposit!

Lunge

Little_Bunny wrote: »

Hello everyone,

Newbie here ... I know SO questions (in particular the downsides) have been done to death but i'm seriously considering it because I am trying to find a 2 bed near a tube preferably in zone 2 and just cannot find anything suitable. Not asking for anything special, def ex-LA, but even so they are going for around £320k+ and I got a MIP for only £280k as i'm a single person. So I am looking into SO as the location is great (no guarantee I will get it tho because a couple will be a higher priority than me) but im just looking into things before I make my final decision.

I would like to know does the housing association use their right of first refusal if I am lucky enough and able to staircase to 100% because if I ever do want to sell obviously i would want to sell it for the maximum i can to help me move onto hopefully a bigger property if i do have a family or just to go up the ladder. Has anyone done this before or did the HA try to find a buyer (they have the right technically for 21 years after staircasing to 100%!).

My only other question is please can someone explain the staircasing process and its pitfalls i.e. does it mean you have 2 mortgages? I read somewhere something like lenders will only lend on the share you own and not the value of the property ... maybe me being a dunce but what does that mean?!

Many thanks,

LB

Every HA is different, and the right of refusal can sometimes only be for a short period of time. What HA are you dealing with?

The staircasing process is essentially a remortgage with capital raising/additional borrowing.

So for example, if you owned 25% of a £400k property, you would have paid £100k for that share originally. If you were then looking to staircase up to 100% at a later date, you would following the process below;

- Inform the HA of your intention to staircase, and choose a RICS qualified surveyor from their list to value your property.
- Surveyor values your property and gives you the report. Let's assume they valued it at £500k.
- You send the report to the HA and request to purchase the remaining 75% at £375k (75% of £500k).
- HA prepares letter to confirm your intention to staircase while in the background you organise your finance.
- You now need an additional £375k in funds plus whatever the balance is on your original £100k purchase. You would have paid down some of that original mortgage and also would have put down a small deposit, so let's assume the balance on that original mortgage is £80k.
- Adding the £80k+£375k, would get you to the total sum needed to purchase the 100%. Total is £455k.
- £455k of £500k gives you an LTV of 91%, so you would potentially need to borrow less to get you to a decent LTV band (i,e you would need to put down more deposit funds).
- When you approach the lender you request a remortgage (even though it's also a purchase) and use the sums above, less any deposit you want to put down to decrease the £455k. So you end up with one mortgage.

Hope this helps!

Little_Bunny

Hi thanks both but particularly Lunge, that does makes things more clearer aka if I did do SO it would be near impossible to staircase unless I earnt much more than I currently do, and I'm not on a bad salary to begin with!

Ps realise my error - my MIP accounts for a £220k loan plus £60k deposit - I'd be made if I got a £280k pure loan lol ��