Government backed 5% deposit mortgages for shared ownership staircasing?

CS_

UPDATE: if you are similarly affected by this grey area in the upcoming Mortgage Guarantee Scheme, or if you care to help people who are, please email your MP, Rishi Sunak (CEU.enquiries@hmtreasury.gov.uk or rishi.sunak.mp@parliament.uk if a constituent), the Secretary of State for Housing (http://forms.communities.gov.uk/ or robert.jenrick.mp@parliament.uk if a constituent). Please raise awareness with groups like Share To Buy, Martin Lewis etc who can put pressure on to make sure that staircasing is included in this scheme. People who are eligible and meet all the government criteria risk being left behind as banks class staircasing as remortgages instead of purchases and will need specific government approval. The scheme is being finalised for April - your chance to make a difference is now!

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My fiance and I were really happy to see the news about stamp duty relief and 5% deposit mortgages as that would mean we'd be in a position to staircase from 25% to 100% on our shared ownership property. Our combined income is fine for a full mortgage (the property value is well within 4.5 times our income), but we haven't managed to save the 15% deposit we were quoted from our mortgage provider, plus stamp duty - which will come to over £40K for us. The property price keeps rising whilst we save this. At 5% deposit and with no stamp duty we'd meet all the requirements. However, when speaking with a Halifax mortgage adviser, they said it was unclear if this government scheme will be allowed for shared ownership staircasing and we'd instead need to remortgage with 15% deposit. When looking at the government list of conditions it looks to me like we DO meet the requirements, as we'd be buying a main residence - but it looks very open to interpretation.

Is anybody able to provide any clarity on this please? Does anyone know of banks who are accepting applications for staircasing with the government-backed 5% deposit scheme?

I worry that if this is left open to interpretation then we will fall into a grey area where we won't be accepted. I feel that this scheme should be to help people like us who have a good credit rating and a stable income to afford a full mortgage, but just can't meet the current high 15% deposit requirements. If Martin Lewis could ask for clarification on this, maybe the government will include clearer guidance for staircasing in this scheme?

Many thanks.

stacyyy

Hi CS, I'm really interested in hearing more on this same topic - has anyone trying to staircase been told by a lender that they will be eligible? We were just told today by our mortgage broker from Habito that we would not be eligible for the new scheme as we're purchasing additional shares in our current home. But it's really unclear to me WHY we're ineligible as we seem to meet all the government criteria. 

Martin, please help! It would be incredible if the government would issue guidance for shared ownership staircasers, as we're in the same boat as everyone else!

[Deleted User]

Martin doesnt own these forums anymore so no point asking for his help

You will be eligible if Remortgage products return at 95%.  Buying more shares in a property you already own isnt a purchase transaction (with small number of exceptions with certain lenders)

stevenbecca

be careful many won't let you purchase more than 25% in one chunk

CS_

stevenbecca said:

be careful many won't let you purchase more than 25% in one chunk

Our housing association are happy with us staircasing to 100% and encourage it. I've written to our MP to ask him to seek clearer government guidelines on this... maybe something will come of that.

CS_

stacyyy said:

Hi CS, I'm really interested in hearing more on this same topic - has anyone trying to staircase been told by a lender that they will be eligible? We were just told today by our mortgage broker from Habito that we would not be eligible for the new scheme as we're purchasing additional shares in our current home. But it's really unclear to me WHY we're ineligible as we seem to meet all the government criteria. 

Martin, please help! It would be incredible if the government would issue guidance for shared ownership staircasers, as we're in the same boat as everyone else!

Hi. See my last post, maybe you could also write to your MP? Even on this Money Saving Expert site it says "Any buyer with a small deposit can get one of these Government-backed mortgages. They are NOT restricted to first-time buyers, but can be used by anybody buying a main home, including previous homeowners and homemovers." Now is probably the time to ask the government to clarify for SO ahead of the scheme's launch in April, I guess the banks would prefer if we had to remortgage at 15% so will need explicit guidelines on this.

CS_

stacyyy - I've been thinking a way around it is to sell our current shared ownership place and move to somewhere else of a similar value, buying outright with the new government backed mortgage. Seems like overkill, we love where we live - would much rather stay here and buy it outright, but at least it'd mean we can get a full mortgage to step up the housing ladder. I don't see any logical reason why we'd be eligible if moving somewhere else, and not if buying all the remaining shares in our SO place - from the bank's point of view this should not make a difference to assessing our credit worthiness. Our income is stable and high enough for a full mortgage, and most people without family help would struggle to hit over £40K for a 15% deposit.

But having spoken to the bank again it does sound like they're saying no to SO staircasing unless they hear otherwise from the government. My impression is they don't really want to be giving anyone 95% LTV mortgages, so it will need to be explicitly directed to them or they'll use the grey area to say no. It'd be great if the government could clarify either way so we can get the ball rolling, as the stamp duty holiday doesn't last for long.. if everyone that cares about this could please email their MP about it this might help.

stacyyy

@CS_ I'll definitely write to our MP! Sounds like the banks are likely to interpret this gray area as ineligibility if it isn't explicitly clarified. 
We love our place too and would hate to move, but also... the valuation done by the housing agency has meant a huge loss since we purchased four years ago at £570K - they've valued it at only £510K, despite our bank saying their index says it's worth £618K! So we're basically trapped unless we can staircase to 100% and then sell it at the open market value...
It's outrageous that you'd have to move home in order to take advantage of this!

[Deleted User]

The banks want to give 95% mortgages.  They make loads of money on them and with the government offering a loss prevention service the lenders will do anything they can to offer mortgages if they are able to do so.  

It remains that you are not purchasing a home.  You are increasing a share in a home you have already purchased. 

If someone had a joint mortgage and wanted to buy out an ex partner would you expect that to be called a house purchase?  Cause thats essentially the same thing. 

CS_

Deleted_User said:

If someone had a joint mortgage and wanted to buy out an ex partner would you expect that to be called a house purchase?  Cause thats essentially the same thing. 

Hi, I appreciate you're a mortgage adviser and all I have here is google - when a couple separate and one buys out the other, do they have to pay the stamp duty that comes with 'buying' a property? This article says not if married or in a civil partnership, it'd be transferring into the others' name (as a new member I can't post the link but google 'must I pay stamp duty if I buy out my ex-wife' from The Guardian).

That's not the same as when SO people buy extra shares - as we'll have to pay stamp duty on this 'purchase'. If the couple are unmarried with a joint mortgage and separate, then it looks more similar to our situation as stamp duty applies.

So from our point of view we're buying a main residence, we haven't already purchased the full property - only 25% of the property - and we'd now like to buy it, take out a mortgage etc which stamp duty normally applies to because it's a purchase. If it's the case that by having purchased 25% of the property we're classed as already having purchased the full property, this would be the exact part that my partner and I (and it appears Stacyy above) are not understanding - so could you elaborate on this please? In our mind, having purchased 25%, got a mortgage and paid stamp duty on 25%, we've only purchased 25% not the full property.. we rent the other 75% from the housing association who own it, and purchasing the full property from the HA is what we aim to do in future. When we buy the full property and go for a 100% mortgage, I can't see why from the bank's point of view we wouldn't be eligible for the 95% LTV mortgage, when we'd be eligible for it if moving somewhere else of the same value. They are only offering us a 85% LTV mortgage.

If the government mortgage guarantee is to help people in exactly our position (high enough income for a full mortgage but haven't saved up the 15% deposit yet), then please be more specific if you think it won't apply to us about why, to help people in this position.

[Deleted User]

Because when you want to borrow more money to purchase additional shares in a shared ownership property it is classed as a remortgage to the vast majority of lenders.  There has been no indication that the scheme allows lenders to protect losses on remortgage business.  
If it does then lenders will try to twist it in whatever way they can in order to lend to people at a low risk.

We are expecting the first products to launch the 2nd week of april so wait and see but based on how these types of mortgages work and have worked for years then they will likely still be classed as a remortgage.