Shared Ownership Staircasing Query

el01csy1105

Hi everyone

At the beginning of last year we moved into a shared ownership flat in London and have a 45% share. At the end of this year our fixed-term mortgage period comes to an end and I am interested in remortgaging and staircasing to and 80%, then eventually a 100% share. Eventually, say in the next 5-7 years, we'll probably be looking to move out and get a bigger place.

I've started to wonder whether or not it's worth staircasing at all, because I worry that we'll end up seeing less profit when we eventually sell. I did some rough sums in my head and I really hope I'm missing some fundamental thing about mortgages and buying/selling property because otherwise it looks like we're best off sticking to our 45% share!

Let's say in 5yrs the flat is worth 350k, this means our share of 45% will be worth £157,500. I VERY roughly estimate we'll have about 85k outstanding on the mortgage by then, so once that's paid off we'll have £72,500 profit to put down as a deposit on a future place. HOWEVER if we staircase to say, 80%, in 5yrs time our share will be worth £280k - but we'll have a far bigger mortgage to pay off, let's say £225k, giving us a profit at the end of just £55k. And that's on top of paying for a more expensive mortgage for five years.

Any advice would be greatly appreciated. To be honest, I like the idea of staircasing, so I'm hoping that I've misunderstood something fundamental that someone can correct me on!

Thanks,

Chris

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just trying to get my head around this..... how much is your property worth now?

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Hi Chris,
i think you are going wrong somewhere in your calculations, here's an illustration....

Your home is worth £300 k, your 45% share is worth £135k. In 5 years time your home will be worth 350k and your share 157K. minus your 85k mortgage = equity of 72.5k.

Your home is worth 300k. You purchase an additional 35% which you mortgage for 105k. in 5 years time your 80% is worth 280k. you've got the same 85k owing on your initial 45% and there's 93k left owing on the extra 35% (based on 25 year mortgage at 5% rate) = 102k for you.

you'll be paying an extra £380-430pcm in interest on the additional 35%. which is around £25k. what will the saving in rent be? is it usually around 3% of the unsold share? so 3% of £105k = £3150 x 5 years = £15750, so will cost you £9088 more over the 5 years. you also need to take off extra lawyers fees and mortgage arrangement fees etc (although guess you'd be paying these anyway as remortgageing so maybe just the stair casing lawyers fees bit.

but still got to be worthwhile doing?

excuse my back of fag packet calculations and terrible spelling and grammar!