Staircasing shared ownership

Lgas

Hi, I have had a quick search but only came across very old threads. We bought our house in early 2011 for £155,000 at 50% mortgage 50% rent shared ownership.
It is now worth around £197,000 (which is what next door hair sold for which is identical).

My question is, do we try and staircase to the largest share we can or overpay on our current mortgage by as much as we can afford? We don't have plans to move in the near future, we love our house, but obviously the price is increasing and any more shares would be at the current market value.


Thanks!

donfanatico

I would say this, as this is my understanding - we only bought shared ownership recently.

Read the lease and other terms to see if once you buy 100% you can sell freely and it is all yours without the HA having any say.
If it is, then think about this. If you want to stay there for more years then it makes sense to buy up to 100% as the mortgage will come to and end but the rent will never (and it will keep increasing) OR if you want to sell and move then overpay as much as possible and with the price increase you will have hopefully enough equity to buy on the open market. You will need to do the sums.

Lgas

Thank you! It is a Bellway development and once you have staircased to 100% it becomes freehold. Overpaying on the mortgage sounds sensible as I don't think this is our "forever" home, I expect we will be here for another couple of years but we will want to move somewhere larger at some point I imagine.

Lgas

I need to double check about selling it, I do vaguely remember Bellway asking to have first refusal to find a buyer but the paperwork isn't to hand.

AliceBanned

Mine is shared ownership with a housing assoc and they have first refusal l to find a buyer for a nomination period of 2 months - after that I can sell either the share I own or if I find a purchaser who wants 100% they can buy 100% on the open market.


I am in a similar situation to you in that I own 40% and prices have gone up a lot in the area - and wondering whether to staircase or not.

Lgas

Having found my paperwork it does say that Bellway have first refusal on whether they would like to find a buyer for it or not if we sell. We will be here for several years longer I'm sure but I'm still confused as to what the best plan is!

getmore4less

its a numbers game.

you pay rent and don't get any gain in value.
you rent the money and get the gain in value.

Over the 6 years you have lost about £20k of value increase
what was the difference between the two rents.

Either way you are 100% liable for maintaining the place so not really shared ownership.

also each staircase you pay the costs.

Lgas

Thank you, that does make sense, I believe our rent started at around £260 and is now at £315 after 6 years. We currently pay £530 a month for the rent and mortgage combined, if we staircased we would do it in one go to 100% and at the current variable rate (so top end/worse case) the mortgage would be around £860, so a bit of a jump, but then it's not money going down the drain towards rent.

Lilla_D

Assuming that you're not locked into a mortgage deal at the time when you'd buy the remaining share, you would effectively do a remortgage with capital raising instead of taking a further advance. I mention this, because some lenders' further advance rates are higher than remortgage rates for the same LTV level.

When you remortgage, you can either keep the same mortgage term as what it is now or you can change it to a shorter/longer term. This will have an impact on your monthly payments. The longer the term, the lower the monthly payment, but you'd pay more interest overall. This way you can tailor the term to your budget. And if you do find yourself with extra disposable cash, most deals allow for overpayments to reduce the mortgage balance quicker.

getmore4less

Lgas wrote: »

Thank you, that does make sense, I believe our rent started at around £260 and is now at £315 after 6 years. We currently pay £530 a month for the rent and mortgage combined, if we staircased we would do it in one go to 100% and at the current variable rate (so top end/worse case) the mortgage would be around £860, so a bit of a jump, but then it's not money going down the drain towards rent.

1/2 of £155k rent £260pm that's just over 4.03%
1/2 of £197k rent £315pm that's just under 3.84%

If you can borrow at 4%(ish). it is costing the same.

it is not the repayment you use to compare just the interest rate.

getmore4less

£215 seems low for a 6y old £77k mortgage have you been overpaying?