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  • FIRST POST
    • brn1411
    • By brn1411 7th Jan 18, 10:53 AM
    • 2Posts
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    brn1411
    Equity release during remortgaging and staircasing shared ownership
    • #1
    • 7th Jan 18, 10:53 AM
    Equity release during remortgaging and staircasing shared ownership 7th Jan 18 at 10:53 AM
    Hi, been reading the threads and didn't get a clear picture. Question I have is can equity be released for the % you own on remortgaging and staircasing a shared ownership??

    I explain better with numbers, so a simple example below (assume staircasing is to 100%):

    Initial full value of house - 500k of which 50% owned on shared ownership. So 250k.
    Mortgage taken out then - 210k with remaining 40k being a deposit.
    Current outstanding mortgage - 175k.
    Current value of flat on revaluation - 550k. (therefore 50% is 275k).

    With outstanding mortgage being 175k, i believe 100k is my equity now? Correct?
    Which means I would need a mortgage of 450k? (550-100)

    If i can only afford a mortgage of 400k based on my salary, can i raise the remaining amount through equity release of the 100k???

    I may have made it complex while trying to keep it simple!!

    Thank you!
Page 1
    • 00ec25
    • By 00ec25 7th Jan 18, 12:25 PM
    • 6,514 Posts
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    00ec25
    • #2
    • 7th Jan 18, 12:25 PM
    • #2
    • 7th Jan 18, 12:25 PM
    you wish to buy a property "worth" 550k by staircasing to 100%

    you currently own 50%, therefore you need to pay the other owner 275k for their 50% that you wish to purchase

    you currently have a mortgage of 175k and will need to get a new mortgage of 175 + 275 = 450k

    you say you can only afford 400k as borrowings so, no, you cannot "release equity" because you seem to have misunderstood what that means:
    either you sell something and release the equity as cash from the profit (sale - o/s borrowing repaid)
    or you borrow against a higher value and release the cash by increasing the amount borrowed against the higher value

    you cannot afford to buy 100% unless you inject 50k of cash from your own savings (you cannot borrow it and it is not available for "release") as you do not have the ability to pay the full 450k purchase price for the 100%
    • Cakeguts
    • By Cakeguts 7th Jan 18, 1:46 PM
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    Cakeguts
    • #3
    • 7th Jan 18, 1:46 PM
    • #3
    • 7th Jan 18, 1:46 PM
    Start again. You want to buy a flat valued at 550k for the 100%. You do not have the 550k in savings so you borrow the money to pay for the flat. At the moment you have paid 100k out of your own money for the flat and you need to borrow another 450k to pay for the rest of it.

    The only way you can get that 100k out of the flat now is to sell the flat to someone else who wants to buy your 50% for 275k. If that happened the mortgage company would get their 175k back and you would get 100k but you would not have the flat anymore.

    You are paying someone ( housing association ?) 550k for a flat. You can't afford to borrow the whole 550k so you have managed to pay 100k towards it out of money you had and money you paid off the mortgage and money you got from the increase in value from your current 50%. So you have paid 100k to wards the whole cost. You now owe only 450k instead of 550k.
    • ViolaLass
    • By ViolaLass 7th Jan 18, 1:51 PM
    • 5,389 Posts
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    ViolaLass
    • #4
    • 7th Jan 18, 1:51 PM
    • #4
    • 7th Jan 18, 1:51 PM
    You cannot pay for 200k worth of house by handing over the same 100k twice.
    • brn1411
    • By brn1411 7th Jan 18, 2:23 PM
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    brn1411
    • #5
    • 7th Jan 18, 2:23 PM
    • #5
    • 7th Jan 18, 2:23 PM
    Understood. its more straightforward that i thought it was!

    thank you
    • chadwick16
    • By chadwick16 30th May 18, 10:51 AM
    • 3 Posts
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    chadwick16
    • #6
    • 30th May 18, 10:51 AM
    • #6
    • 30th May 18, 10:51 AM
    I followed this thread with great interest.


    I would like to staircase from 70% to 100% ownership of my property. The value increase of my existing 70% share is equal to the current market value of the remaining 30% still owned by the housing association.


    I cannot take out a further advance on my mortgage due to affordability status and I'd like to keep my mortgage borrowings the same as they are now. I understand I cannot trade this equity increase for cash too. However, in the spirit of encouraging first time buyers towards outright ownership, could I sell my 70% to the HA and instantaneously repurchase 100% at market value? I think this is termed "downward staircasing" followed by 100% staircasing.


    In my view, both I and the HA would benefit from this arrangement as I would own my property and they would have less partial shares to dice up to a new potential shared owner if I sold my 70% at any stage.


    Any thoughts or experiences greatly appreciated.
    • ViolaLass
    • By ViolaLass 30th May 18, 11:22 AM
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    ViolaLass
    • #7
    • 30th May 18, 11:22 AM
    • #7
    • 30th May 18, 11:22 AM
    How are you going to buy the 100% without a bigger mortgage?
    • chadwick16
    • By chadwick16 30th May 18, 12:15 PM
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    chadwick16
    • #8
    • 30th May 18, 12:15 PM
    • #8
    • 30th May 18, 12:15 PM
    I would use the proceeds of the sale of my 70% to buy the remaining 30% outright. The value increase of my existing 70% share is equal to the current market value of the remaining 30%.


    The oddity is that I would be at the beginning AND end of 'the chain'.
    • ViolaLass
    • By ViolaLass 30th May 18, 1:19 PM
    • 5,389 Posts
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    ViolaLass
    • #9
    • 30th May 18, 1:19 PM
    • #9
    • 30th May 18, 1:19 PM
    But you would need the proceeds of the 70% to buy back the 70%.

    You can't buy more of a house without some more money coming into the equation somewhere.
    • chadwick16
    • By chadwick16 30th May 18, 1:29 PM
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    chadwick16
    I would take out the same mortgage amount on the 70% as I do now...why would I need to inject any more cash into that part?


    'More money' would come into the equation at the point of sale of the 70%. As I've said, the increased value of my existing 70% share is equal to the current market value of the remaining 30%. That increased value would be released, as cash, at the point of sale back to the HA, and used immediately to buy the remaining 30% outright.
    • mije1983
    • By mije1983 30th May 18, 1:30 PM
    • 3,189 Posts
    • 19,099 Thanks
    mije1983
    I would use the proceeds of the sale of my 70% to buy the remaining 30% outright.
    Originally posted by chadwick16

    Great. But how are you getting the funding to buy back the 70% at today's market value? If you sell it to the HA for say 100k, then you need to pay 100k to repurchase it. Except you won't be able to as some of it will have gone towards the 30%.

    This is a total non starter without more money. Effectively you are wanting a bigger slice of the property but can't pay for it.

    I also think you are misjudging what would be good for the HA. A steady stream of income with limited responsibilities may well be preferable to a lump sum now.
    Last edited by mije1983; 30-05-2018 at 1:32 PM.

    • ViolaLass
    • By ViolaLass 30th May 18, 2:21 PM
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    ViolaLass
    I would take out the same mortgage amount on the 70% as I do now...why would I need to inject any more cash into that part?


    'More money' would come into the equation at the point of sale of the 70%. As I've said, the increased value of my existing 70% share is equal to the current market value of the remaining 30%. That increased value would be released, as cash, at the point of sale back to the HA, and used immediately to buy the remaining 30% outright.
    Originally posted by chadwick16

    The HA is not going to let you sell the 70% at current value and then buy it back at the old value. They will sell it back to you at the current value, negating the point of selling.
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